IMF’s Lagarde sees case for central bank digital currency

IMF chief Christine Lagarde said on Wednesday that there “may be a role for the state to supply money to the digital economy.” (AFP)
Updated 14 November 2018
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IMF’s Lagarde sees case for central bank digital currency

  • ‘The key is to harness the benefits while managing the risks’
  • There ‘may be a role for the state to supply money to the digital economy’

SINGAPORE: With growing innovation in the financial sector and a move toward a cash-less society, there is a role for central banks to enter the world of digital currencies, IMF chief Christine Lagarde said Wednesday.
Unlike private currencies like bitcoin and ethereum, money created by central banks would be regulated and trustworthy, and could reach all sectors of society, Lagarde said in a speech prepared for the Singapore Fintech Festival.
“The key is to harness the benefits while managing the risks,” Lagarde said. “Proper regulation of these entities will remain a pillar of trust.”
However, while central banks in several countries are considering e-money, questions remain about whether it makes sense for every country.
There “may be a role for the state to supply money to the digital economy,” and she noted that Canada, China, Sweden and Uruguay were “seriously considering” issuing digital currency.
An official e-money would have the advantage of fulfilling policy goals including financial inclusion, security and consumer protection.
“My message is that while the case for digital currency is not universal, we should investigate it further, seriously, carefully and creatively,” she said.
The IMF issued a report on Wednesday examining the issues central banks would face if they decided to issue electronic money.


Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

Updated 23 April 2019
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Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

  • The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios
  • SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year

RIYADH: Saudi Real Estate Refinance Co. (SRC), modelled on US mortgage finance firm Fannie Mae, aims to issue up to 4 billion riyals ($1.07 billion) of long-term sukuk this year, its chief executive said on Tuesday.

The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios from mortgage financing companies and banks to boost the Kingdom’s secondary mortgage market.

SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview.

“Our strategy is clearly to tap the market twice this year,” he said. “We are really looking at probably issuing something between ... 2 and 4 billion riyal that we may be issuing in two tranches.

He said SRC was looking at sukuk in the 10 to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said.

He said the company was assessing whether it could also issue bonds in currencies other than the local riyal.

In March, SRC completed a 750 million riyal sukuk issue with multiple tenors, under a program that allows it to issue up to 11 billion riyals of local currency denominated Islamic bonds.

“The rule of the game for us is, like many projects across the Kingdom, attract liquidity from foreign investors,” Susini said.

He said SRC had spent 1.2 billion riyals from its balance sheet buying mortgages from local mortgage financing companies and provided liquidity to these firms.

It has also signed initial accords with several commercial banks to acquire housing mortgage portfolios.

Saudi Arabia’s housing ministry is targeting the mortgage market to reach a total value of 502 billion riyals by 2020 from around 300 billion riyals now.

The government wants to increase activity in the real estate market as it moves to revitalize the economy and is taking steps to reform the sector as part of its 2030 reform plan.

It has been working with developers and local banks to counter a shortage of affordable housing — one of the country’s biggest social and economic problems. Saudi Arabia wants 60 percent of its nationals to own homes by 2020, up from 47 percent in 2016.

The size of real estate financing relative to its gross domestic product is 5 percent in Saudi Arabia compared to 69 percent in the United States, 74 percent in the United Kingdom and 43 pct in Canada, the housing ministry has said.

“The goal of SRC in this market was to make sure that we will be able to refinance at least around 10 percent of the market in 2020, and 20 percent of the market by 2028,” Susini told Reuters.