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"Countries in this region have been moving towards better regulations" |
Despite investors in Latin America trading $20 billion-worth of the securities backed by assets such as mortgages and credit card payments in 2006, almost triple the $6 billion traded in 2002, the market is still in its infancy.
"Although the market has been developing quite strongly in the past five years, the overall size is still quite small when compared with other emerging markets," says Michela Scatigna, one of the authors of the BIS Quarterly Review report. "Countries in this region have been moving towards better regulations to help develop complex structured finance products but the laws and regulations are still not well understood or well implemented."
"There is a sum of different factors that are putting sand on the wheels of growth for this market but fine-tuning the regulations and legal framework is the main reason we haven’t seen huge growth."
One key example of this issue is seen in Brazil. The RMBS market is still very small. According to Scatigna, this is because the laws on house repossession, after a loan has fallen delinquent, are still not implemented correctly, even though new regulations were introduced in 2002.