Covered Bonds

Mike Hammond, head of capital markets and co-head of markets at UniCredit, recently spoke to EuroWeek’s Toby Fildes about the how the bank is faring in these challenging times. In this excerpt from that interview, he says that conditions have hurt competitors worse than UniCredit, and discusses the bank’s progress in covered bonds.

*The second column in this table indicates movement compared to the rankings on 1 July 2008.

Barclays Capital has taken the lead in The Cover’s benchmark covered bond league table and UniCredit second place at the end of July, with Deutsche Bank being knocked off the top spot for the first time this year. With the race so tight, this week’s events in the US could yet end up being a deciding factor come year-end and boost the position of Wall Street houses.

A bill put forward by Republican congressman Scott Garrett is seeking to wrest control of key elements of a US covered bond framework away from the Federal Deposit Insurance Corporation and give issuers more flexibility to use the product, while tightening key investor protections.

Covered bond issuance in South Korea will initially be under the country’s Asset Backed Securitisation Act, according to an official at the Financial Services Commission, although the government could consider a specific covered bond law at a later date.

In brief: The Cover has learnt that Chelsea Building Society is the latest UK financial institution planning to turn to covered bonds for financing.

Property company Martinsa-Fadesa’s insolvency, negative rating actions on financial institutions, and, at last, falling house prices – is this Spain’s economic slowdown turning into a hard landing, or just a case of overblown bad press? The Cover spoke to bankers and analysts to gauge sentiment in these testing times.

The Association of German Pfandbrief Banks (vdp) has told banks that it expects them to resume inter-dealer market-making on 1 September, quoting prices for tickets with a minimum size of Eu15m at triple normal bid/offer spreads for jumbos of two years or longer, irrespective of spread level. The move represents a break from common standards with the European Covered Bond Council and runs counter to many of the arguments against fixed market-making standards that have been made in the past year.

Here is the US Treasury’s summary of its Best Practices. Covered bonds must comply with these to be consistent with the Treasury’s guidelines, which are included in full in its Best Practices Guide.

The speed at which the US authorities have moved to create the preconditions for covered bond issuance has been nothing short of breathtaking. However, unless market participants can find the final key to unlocking the market, it will all have been in vain.