6.4 The NPCs and the regulatory bodies should make all attempts to persuade retail payment service providers to use common national and inter-regional and infrastructure and fostering the standardization and harmonization of retail payment systems. The high cost involved in retail payment systems processes is not necessarily due to the large volumes or the wide array of payment instruments, but due to the use of a large number of proprietary infrastructure systems by service providers and the passing on of these high costs to users. While introducing customer-centric products, it is important to ensure that customers are protected and their rights are preserved. I hope some of the opportunities mentioned above and many others that will be highlighted during the rest of this Summit will be taken up by the banking community and service providers and that they will work closely with the SPC to take the region’s payment system development process forward. Thank you. 8  BIS Review 61/2008
This spread is influenced by a number of elements, such as the valuation attached to the right to service the mortgages underlying the security, and the annual guarantee fee that is paid to cover the credit guarantee provided by the government-sponsored enterprises (GSEs). The observed widening of the primary-secondary spread likely reflects many factors. Part of this widening is due to higher annual agency guarantee fees which are a necessary and overdue re-pricing of the credit guarantee provided to investors. While these guarantee fees differ by mortgage and by seller, the average effective guarantee fee has increased from 20 to 25 basis points to around 50 basis points today. But this still leaves a significant part of the spread left to be explained by other factors such as changes in originators’ costs and profits. As you all know, the primary-secondary spread is a technically imperfect measure of the pass-through from primary rates to secondary rates. A new study1, by authors including New York Fed staff, adjusts for these factors to come up with a measure of originator2 profits and unmeasured costs, or OPUCs. The basic picture remains the same, with OPUCs at historically elevated levels. The paper evaluates a number of potential factors that could help explain this increase. These include the decline in the value of mortgage servicing rights, credit losses and other costs associated with put-back risk, possible changes in pipeline hedging costs and other loan production expenses.