Covered Bonds

Important differences between Canada and the US in terms of their mortgage markets and economies mean that Canadian banks should be seen as strong names in the covered bond market, said speakers at IMN’s Covered Bonds – The Americas conference in Hollywood, Florida on Tuesday. But they said that although Canada’s market has developed more quickly than that of its neighbour south of the border, it needs a North American investor base if it is going to be able to progress.

The Financial Services Authority is reviewing its approach to assessing covered bonds and asset encumbrance, and says that in the meantime issuers must discuss in advance all plans for covered bond issuance. The FSA today (Thursday) wrote to the British Bankers’ Association and the Building Societies Association to explain its current thinking.

HM Treasury said yesterday (Wednesday) afternoon that UK covered bonds are not within the scope of the government’s guarantee scheme, as anticipated by The Cover. The Treasury’s explanation suggests that it may believe that a guarantee is unnecessary for issuers to restart covered bond issuance.

In brief: Leeds Building Society has executed what is believed to be its first covered bond, while French issuers have been tapping some outstanding issues.

In brief: ING and Crédit Mutuel group members were downgraded this week, but the only covered bonds to have been cut so far this week have been those of Ukraine’s Bank Khreschatyk.

It is commonplace to speak of Latin America as an emerging market region, but when it comes to covered bonds Mexico is almost as developed as the US. There are still obstacles to overcome, but speakers on a Latin America panel at IMN’s Covered Bonds - The Americas conference in Hollywood, Florida yesterday (Tuesday) were confident that covered bonds will have a role to play in the housing finance market.

As it has been in Europe, the lack of liquidity in covered bonds was criticised at the IMN Covered Bonds - The Americas conference in Hollywood, Florida yesterday (Tuesday). However, dealers said that they had listened to investors and were just waiting for the first new US issue to show their commitment to the product.

The Office of the Comptroller of the Currency on Monday published guidance as to how the banks it regulates can get the consent they need from it to issue covered bonds under the terms of the Federal Deposit Insurance Corporation’s policy statement.

HM Treasury is expected to announce shortly that UK covered bonds will not be included in the bank debt that can qualify for a government guarantee. Meanwhile Barclays Bank this (Wednesday) morning launched the first public government guaranteed bond.

Clydesdale Bank has issued the first covered bond off a Eu9bn programme, a £1.85bn January 2012 deal.

The strengths of covered bonds were highlighted on a panel at IMN's ABS East event in Hollywood, Florida yesterday (Monday) afternoon, where recent developments in the European market, the Federal Deposit Insurance’s stance, and JP Morgan’s taking-on of Washington Mutual’s covered bonds were held up as encouraging for the US market.