Covered Bonds

Bank of Ireland has set up three covered bond related vehicles in the UK, The Cover has learnt, suggesting that it could be setting up a programme under UK legislation. The bank already issues Irish asset covered securities through Bank of Ireland Mortgage Bank.

The four US banks setting up covered bond programmes in accordance with the Treasury’s recent guidance are understood to have formed a joint working group to examine the best possible structure. Direct issuance is being targeted, as this is seen as having the best chance of attracting US investors to covered bonds.

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Dexia is considering setting up a covered bond programme in Japan under local general law to support its growing public sector business in the country, The Cover has learnt. The programme could also allow the group to tap into a new investor base.

The Treasury was flanked by key regulators and issuers when it released its Best Practices template for US covered bonds last week. The Cover asked representatives of other parts of the market what impact the authorities’ moves were likely to have on the development of the market.

The Cover understands that different parts of Sumitomo Mitsui Banking Corp are planning to set up public sector backed covered bond programmes in the UK and Japan, both of which would be major landmarks.

Woori Bank is planning to issue about $500m (Eu323m) of covered bonds by April while SC First Bank is “very interested” in selling bonds in the format.

In brief: South Korea’s Woori Bank is reported to be hoping to issue covered bonds by the end of the year.

The Cover understands that EuroCredit MTS is quietly moving towards removing key minimum standards for covered bonds traded on the inter-dealer platform. While this would take it in the direction of the greater flexibility that some market participants are seeking, it would run counter to the Association of German Pfandbrief Banks’ plan for market-making commitments to be resumed.

When the Federal Deposit Insurance Corporation’s and US Treasury’s covered bond announcements came out, David Lucterhand, chief of party at Access to Credit Initiative (ATCI) in Kiev, reacted by writing to colleagues: “Finally, somebody understands what we’ve been talking about for years!”