North America

In brief: US law firm McKee Nelson is gearing up for the anticipated growth of issuance in the country with the creation of what it says is the first dedicated covered bond team in the States.

Critical assurances on the position of covered bonds in receivership and greater flexibility on eligibility criteria are two key demands of respondents to the Federal Deposit Insurance Corporation’s consultation on its proposed policy statement. The American Securitization Forum and Bank of America were among those getting their responses in ahead of this week’s deadline.

Washington Mutual has criticised Moody’s for a lack of understanding of the FDIC receivership process in its comment letter to the regulator regarding the planned US covered bond policy statement.

Attendees of the US Treasury’s covered bond meeting yesterday (Tuesday) described the get-together of market participants and regulators as both unprecedented and productive.

The US Treasury is holding a meeting today (Tuesday) bringing together regulators and market participants to further the development of the covered bond market in the States.

With Canadian Imperial Bank of Commerce visiting investors on a European roadshow next week, The Cover spoke to the issuer as it attempted to explain why its mortgage-backed debut would also be the first public sector bond from Canada.

Moody’s last (Tuesday) night cut the rating of Washington Mutual’s covered bonds from Aa1 to A2. The action follows downgrades by Moody’s that in March left WaMu Bank’s senior unsecured rating at Baa2.

Last week the Federal Deposit Insurance Corporation laid the foundations of a US covered bond framework with a draft policy statement that it hopes to finalise in the autumn. The Cover spoke to Washington Mutual, the first US issuer to have launched a covered bond, for its reaction to the move.

The US Federal Deposit Insurance Corporation’s interim final policy statement, published last week, showed its willingness to give covered bonds a privileged status, but, as a consultation document, it raised as many questions as it answered. However, an FDIC spokesperson gave The Cover clarifications on several points.

US banks have broadly welcomed the Federal Deposit Insurance Corporation’s draft policy statement on covered bonds, confident that any limits the regulator has put in place will not prove overly restrictive in the longer term. But while the FDIC’s endorsement is seen as a crucial first step, some observers are already pressing for more.

The Federal Deposit Insurance Corporation’s draft covered bond policy statement proposes that covered bond issuance be limited to 4% of an issuer’s total liabilities, but raises the prospect of allowing greater issuance if higher insurance premiums are paid. It also plans to exempt covered bonds from the full 90 day stay on payments in the event of bankruptcy, but in a way that would not completely remove the possibility of delays.

The Federal Deposit Insurance Corporation today put forward its interim proposals for a policy statement on covered bond issuance in the US, inviting comment on a 4% limit of covered bond issuance to total liabilities and a 10 day repudiation period.