GFC also led to a fundamental shift in our approach to banking regulation and supervision, essentially by exposing the fault lines in the inadequacy of earlier regulatory architecture. 1 Keynote speech delivered by His Excellency Dr. Mohammad Y. Al-Hashel, Governor, Central Bank of Kuwait in the  14th High Level Meeting for the Middle East & North Africa Region, jointly organized by the Basel Committee on Banking Supervision, the Financial Stability Institute and the Arab Monetary Fund, on December 11, 2019 in Abu Dhabi, UAE. Central Bank of Kuwait - Public ‫ عام‬- ‫بنك الكويت المركزي‬  -2-  By now, those fault lines are well-understood. Banks held too little capital and of poor quality. Inadequacy of capital was further weakened by the absence of a backstop measure to contain excessive leverage. Banks that were too big to fail enjoyed the market power but were not required to internalize the cost of risks they brought to the overall system. Suitable measures of liquidity, in both funding and market sense, were lacking. And the efforts to contain systemic risk, both in its time and structural dimension, were hardly in sight. In a nutshell, the rule book was evidently deficient. And if that was not enough, banking supervision was micro prudential in nature. Supervisors believed that ensuring stability of individual institutions would make the system as a whole stable, thus largely ignoring the buildup of systemic risk. The GFC brought into sharp focus the gaps in our regulatory regime.
The nine MBS issues sponsored by the HKMC so far, totalling $ billion dollars, have all been guaranteed by the HKMC. These issues were all welcomed by investors. The HKMC prides itself on being a financial institution that spearheads product innovation in Hong Kong's capital markets. For this issue, after consulting the market, the HKMC has decided to adopt a MBS structure along the lines of a Collateralised Mortgage Obligation. The CMO structure divides the pool of underlying mortgage assets into credit tranches or classes with different tenors and interest rates to suit the appetites of a wider range of investors in Hong Kong and the region. In today's two billion dollars MBS issue, the Class A portion accounts for 87% of the issue and does not carry any guarantee. Class B accounts for 13% of the issue and is guaranteed by the HKMC. Class A has been assigned a triple-A rating by both Moody's and S&P's. The award of this top rating to Class A reflects the good credit quality of the underlying mortgage pool and the credit enhancement through subordination provided by Class B, which absorbs the first loss in the mortgage pool. The low level of subordination at 13% reflects the high quality of the collateral, the innovative structuring of the issue and market's confidence in the HKMC's ability to manage the credit risk of the mortgage portfolio.