Analysts expect a covered bond market to develop in Holland like that in the U.K., where no covered bond legislation exists and issuers have developed comparable securities using contractual frameworks. Likely issuers include the trio of double-A rated lenders with between 10% and 20% share each of the approximately 400 billion outstanding in Dutch residential mortgages. Rabobank, the market leader with close to 30% share, is seen as unlikely to turn to covered bonds as it is triple-A rated and already has a very low cost of funding.
An official at Fortis, which has about 45 billion in mortgages on its balance sheet, declined comment because the bank is in a quiet period. Jan Menger, a treasury department official at ING, and Rolf Smit executive v.p. of group asset & liability management at ABN AMRO in Amsterdam, did not return calls by press time.
The Netherlands is the third largest market for residential mortgage-backed securities in Europe, and lenders in the top two marketsthe U.K. and Spainalready use covered bonds alongside RMBS.
Other countries that might start seeing domestic banks sell covered bonds this year include Sweden, which passed a covered bond law in 2004 (BW, 8/30), and Italy, where covered bond legislation is well-advanced (BW, 8/9). Countries with covered bond laws in place include Germany, Denmark, Spain, France, Ireland, Luxembourg, Austria and Finland. Many of the new European Union members have covered bond laws, but little or no euro-denominated issuance.