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TBMA Zeroes In On Covered Bonds

The Bond Market Association and its European Securitisation Forum are increasing their focus on covered bonds as the asset class continues to grow in Europe.

The Bond Market Association and its European Securitisation Forum are increasing their focus on covered bonds as the asset class continues to grow in Europe. Covered bonds are similar to mortgage-backed securitizations except covered bonds are done on corporate balance sheets.

The recently formed pan-European covered bond committee will hold its inaugural meeting at the end of the month to determine how the association can help harmonize the market, according to Peter Hansen, managing director at the ESF in London. All the major covered bond players are on board, he said, including Deutsche Bank, Barclays Capital, ABN AMRO and Dresdner Kleinwort Wasserstein. Two co-chairs of the committee will be announced at the October meeting, he added.

Even though covered bonds are not securitizations, the ESF is forming a committee because market professionals analyze covered bonds in a similar fashion to asset-backeds. Also, corporate treasurers are increasingly viewing covered bonds as an alternative to funding through securitization.

Although the market has historically been dominated by Germany's Pfandbrief, eight other European jurisdictions either have issued covered bonds or have pending legislation that would cover issuance. "The market is growing enormously and is becoming a true European market," observed Hansen.

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