For example, in the securitisation market, originators need a two-layer structure to create pan-European transactions backed by well diversified multi-jurisdictional asset portfolios: first, assets must be securitised at the domestic level, and then, a pan-European vehicle backed by several domestic securitisation transactions must be set up. This is a complex procedure and incurs costs. I now turn to an important retail market, namely the mortgage credit market which represents in the EU an outstanding volume of around EUR 4 trillion. The lack of integration manifests itself here in numerous ways. In no national market can borrowers access the full range of mortgage products. Moreover, only a negligible portion of European mortgage credit is granted across borders, and the techniques for loan origination and servicing differ substantially from country to country. More than half of mortgage lending is still financed by retail deposits, although in recent years capital market instruments, such as covered bonds and residential mortgage backed securities, have gained in importance. These are important asset categories that can also be used as collateral in the Eurosystem’s monetary policy operations. Nevertheless, they still exhibit a high degree of heterogeneity across countries due to differences in their legal, tax and regulatory framework. BIS Review 18/2005  3  Given the size of the mortgage credit market, the costs incurred through the lack of integration cannot be ignored.
The constraints imposed by such a financial infrastructure, and the inadequacies and inefficiencies attendant thereto, provide key justification for the development of the capital market which will play the lead role for mobilizing domestic and foreign investment, as well as engendering low cost, efficient, financial intermediation. While in our financial sector development we have taken steps to improve the payments system, supervision of banks, strengthening their capital base, and enhancing efficiency in general, we have also put strong emphasis on ensuring the emergence of a comprehensive financial sector, that will meet the demands of an emerging market economy such as ours. BIS Review 107/2007  1  In the process of developing the capital market, we have worked with private sector and external development partners, especially the First Initiative and the Commonwealth Secretariat, to put in place a robust legal and regulatory framework that will facilitate the process. Through the Resident Consultant provided by the First Initiative, we have defined the system of regulations that would guide the operations of the capital market, and the stock exchange in particular, in all facets of its operations. We have ensured that these are consistent with acceptable international standards, and I can now confidently say that our stock exchange will operate with adequate safety and protection of the interests of the investing public. No one therefore should entertain any fears in transacting business through our stock market. The process of developing the legal framework has been participatory and transparent.