Thailand’s Secondary Mortgage Corporation (SMC) is hoping to issue a form of covered bonds in the near future, according to an official at the state agency, and this goal came closer to realisation after the Thai government approved an amendment to the decree governing SMC.

The Thai financial authorities and banking industry have been working on covered bond proposals for some time and in November 2013 an exploratory committee was established by the Public Debt Management Office (PDMO), which is part of the Ministry of Finance, with the Bank of Thailand also involved.

The Ministry of Finance two weeks ago announced that the Cabinet had approved an amendment to the decree governing SMC, aimed at broadening the country’s mortgage finance system. SMC is an agency owned by the Ministry of Finance and purchases mortgage loans from originators to refinance.

The amendment is yet to be confirmed, but once it comes into effect SMC will be able to issue covered bonds.

Unchulee Simasathien, senior executive vice president and acting president of SMC, told The CBR that the institution is interested in using covered bonds as a funding vehicle, adding them to its existing range of capital markets instruments – mortgage backed securities, bonds, promissory notes and bills of exchange. SMC plans to sell its products to foreign investors in the near future, she added, mainly MBS and covered bonds.

An official of one of the Thai financial authorities said that SMC is the main institution to have shown an interest in issuing covered bonds.

According to an SMC presentation from March, the introduction of covered bonds alongside MBS is one of a variety of initiatives to develop mortgage finance in Thailand that also includes the establishment of non-bank mortgage companies, the introduction of reverse mortgages, and mortgage insurance/guarantees.

At end-2015, SMC had total assets of almost THB25bn (Eu624m), according to the presentation, with some THB7bn of securitisations in 2015.