Covered Bonds

Denmark’s mortgage banks, central bank and financial supervisory authority have said that new liquidity rules proposed by the Basel Committee on Banking Supervision and the European Commission pose a serious threat to the Danish mortgage credit system and wider economy and would destroy the country’s model of adjustable rate mortgage (ARM) lending.

EFG Eurobank Ergasias has set up a second covered bond programme, which is backed by Greek residential mortgages mainly denominated in Swiss francs. Moody’s yesterday (Monday) assigned an A1 rating, on review for possible downgrade, to a first series launched off the Eu3bn programme.

Canadian bank Toronto Dominion has filed a Eu10bn public sector covered bond programme.

The introduction of a new Finnish covered bond law, expected for July, should not affect the issuance strategies of the country’s two issuers, but could result in at least one new institution entering the market.

Moody’s has cut HSH Nordbank’s ship Pfandbriefe from Aa3 to A1, on review for possible downgrade, after completing a review of its rating methodology for structured finance transactions backed by shipping loans that led it to take a more conservative view on the cover pools of such assets.

Standard & Poor’s downgraded Intesa Sanpaolo and revised the outlook on UBI Banca’s rating from stable to negative on Friday, because it expects low growth in Italy’s economy to pressure the banks’ asset quality.

UniCredit plans to amend a type of SARA clause in its obbligazioni bancarie garantite (OBG) programme that effectively nullifies the provision, but the change will not affect the bank’s AAA covered bond rating, said Fitch on Friday.

The European Central Bank reported a Eu1.515bn increase in purchases under its covered bond programme this week, the above-average total coinciding with a recent burst of primary market activity.

The UK Treasury has said that covered bonds are not an acceptable asset for liquidity buffers, arguing in a submission on CRD IV that the crisis has shown that they are not “resiliently liquid instruments”. Among other EU authorities to respond to the European Commission, only the Maltese adopt a similar position.

At least two issuers are said to be preparing covered bond issues for next week, assuming markets have settled after heavy peripheral spread-widening, with others due to proceed with roadshows that had to be put on hold because of the recent disruption to air travel.

Moody’s this (Friday) morning downgraded National Bank of Greece from A2 to A3, after cutting the Greek sovereign rating similarly yesterday (Thursday).

Standard & Poor’s yesterday (Thursday) affirmed public sector-backed covered bonds issued by Deutsche Postbank at AAA and removed them from its review list.