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| Cagamas | |
|---|---|
| Name | Cagamas |
| Type | Corporation |
| Founded | 1977 |
| Headquarters | Kuala Lumpur, Malaysia |
| Industry | Finance |
| Products | Mortgage funding, Asset-backed securities, Bonds |
| Key people | Mohamed Ariff (example) |
Cagamas is a Malaysian national mortgage corporation established in 1977 to develop a secondary mortgage market and provide liquidity to primary lenders. It operates as a specialized financial institution that purchases housing loans and issues debt securities to investors. The corporation interacts with a range of Malaysian and international institutions to facilitate long-term financing for residential and commercial mortgages.
Cagamas was established under Malaysian legislation with involvement from the Bank Negara Malaysia, the Ministry of Finance (Malaysia), the Employees Provident Fund (Malaysia), and the Permodalan Nasional Berhad to address housing finance needs in the aftermath of 1970s energy crises and regional shifts in capital markets. Early partners included the Malayan Banking Berhad, the Public Bank Berhad, the RHB Banking Group, and the Hong Leong Bank. During the 1980s and 1990s Cagamas expanded its dealings with international institutions such as the International Monetary Fund, the World Bank, the Asian Development Bank, and the International Finance Corporation. The corporation adapted to the 1997 Asian Financial Crisis by adjusting funding models similarly to reforms pursued by the Securities Commission Malaysia and aligning with practices from the Bank for International Settlements. Subsequent decades saw ties with the Kumpulan Wang Persaraan (Diperbadankan), the Kuwait Investment Authority, the Government of Singapore Investment Corporation, and global banks including HSBC, Standard Chartered, and Citibank in capital market activities.
Cagamas's ownership structure involves shareholding by major Malaysian entities including the Bank Negara Malaysia and statutory funds such as the Employees Provident Fund (Malaysia), alongside commercial banks like Maybank and institutions such as Amanah Saham Nasional Berhad. Its board composition typically features representatives from the Ministry of Finance (Malaysia), the Securities Commission Malaysia, and senior executives drawn from the Malaysian Institute of Accountants and the Association of Banks in Malaysia. Cagamas’s corporate governance interacts with standards promulgated by organizations such as the International Accounting Standards Board, the International Organization of Securities Commissions, and the World Bank Group. Strategic collaborations have included joint initiatives with the Khazanah Nasional Berhad and bilateral discussions with sovereign wealth funds like the Qatar Investment Authority and the Norwegian Government Pension Fund Global.
Cagamas purchases retail mortgage portfolios originated by lenders such as CIMB Group, Affin Bank, and Bank Islam Malaysia Berhad and converts them into tradable instruments. Its core offerings comprise mortgage-backed securities, asset-backed securities, secured notes, and wholesale funding facilities used by institutions including Alliance Bank Malaysia, Bank Rakyat, and Islamic finance operators tied to Sukuk markets. Cagamas issues debentures and bonds in domestic markets traded alongside instruments like Malaysian Government Securities and interacts with primary dealers such as AmInvestment Bank. It also provides liquidity lines and securitization services comparable to structures used by the Federal National Mortgage Association and the European Mortgage Federation in other jurisdictions.
Cagamas serves as a conduit between primary mortgage originators such as Syarikat Perumahan Negara Berhad and capital markets including investors like the Khazanah Nasional Berhad and the Employees Provident Fund (Malaysia). By purchasing loans from lenders such as Bank Muamalat Malaysia and OCBC Bank (Malaysia), it enables credit expansion for housing programs related to initiatives from the Ministry of Housing and Local Government (Malaysia). Its activity supports financing for affordable housing schemes connected to agencies like the Federal Territories Ministry and aligns with national housing targets set by the 10th Malaysia Plan and subsequent development plans. Interaction with rating agencies such as RAM Ratings and Fitch Ratings influences issuance and investor confidence.
Cagamas’s funding performance is influenced by interest rate movements set by the Bank Negara Malaysia and capital market dynamics involving participants such as the Bursa Malaysia and international investors including BlackRock and Vanguard Group. Financial reporting follows standards from the Malaysian Financial Reporting Standards Board and oversight involves auditors from firms like PricewaterhouseCoopers, KPMG, and Ernst & Young. Governance benchmarks reference practices endorsed by the Organisation for Economic Co-operation and Development and the International Monetary Fund. Key financial metrics include securitization volumes, net interest margins, and credit spreads relative to benchmarks like Malaysian Government Securities and global indices published by JP Morgan.
Risk frameworks at Cagamas incorporate credit risk assessment methodologies used by lenders including DBS Bank (Malaysia), market risk models influenced by the Bank for International Settlements guidelines, and liquidity contingency plans consistent with recommendations from the Financial Stability Board. Regulatory supervision involves coordination with Bank Negara Malaysia, the Securities Commission Malaysia, and compliance standards echoing the Basel Committee on Banking Supervision accords. Stress testing and asset quality monitoring use data from primary lenders such as Hong Leong Bank Berhad and national datasets maintained by the Department of Statistics Malaysia. Shariah-compliant products are reviewed by panels drawing expertise from institutions like the International Shariah Research Academy for Islamic Finance (ISRA).
Critiques of Cagamas have focused on concentration risks similar to debates about institutions such as Fannie Mae and Freddie Mac and concerns raised by academics at universities like University of Malaya, Monash University Malaysia, and Universiti Kebangsaan Malaysia. Commentators from think tanks such as the Institute for Democracy and Economic Affairs and policy analysts associated with the Khazanah Research Institute have questioned pricing transparency and market dominance effects. Episodes of market tension have involved interactions with commercial banks including RHB Bank and regulatory responses by Bank Negara Malaysia studied in analyses published by the Asian Development Bank Institute and the World Bank.
Category:Finance in Malaysia