North America

Moody’s yesterday (Wednesday) downgraded the senior debt rating of Bank of America NA from Aa2 to Aa3, on stable outlook, concluding a review for possible downgrade that started earlier this month.

Michael Krimminger, special advisor for policy, office of the chairman of the Federal Deposit Insurance Corp, told delegates at IMN's Global Covered Bonds conference in London on Friday that the FDIC hopes that its proposed addition of a collateralised element to the Temporary Liquidity Guarantee Programme could act as a stepping stone to the issuance of covered bonds in the US. But covered bond bankers are skeptical, and think that the term covered bond should be used with caution in the context of the FDIC’s proposal.

Fitch yesterday (Tuesday) affirmed the AAA rating of Bank of America’s covered bonds, of which around $9.4bn (Eu7.4bn) are outstanding.

Moody’s put JP Morgan Chase & Co on negative outlook yesterday (Wednesday). It is rated Aa3, but the recession is expected to create high provisions and credit costs for the next four to six months.

Bank of America NA and Bank of America Corporation were put on review for downgrade by Moody’s yesterday (Wednesday). Bank of America NA is rated Aa2 and its parent A1.

The Office of the Superintendent of Financial Institutions Canada gave measured encouragement to proponents of a legislation framework for Canadian covered bonds at a conference in Toronto yesterday (Wednesday).

The US should look to the Danish mortgage bond system for lessons on how to operate a stable and functioning market, suggested panellists on a forum hosted by Nykredit at the Euromoney Bond Investors Congress on Tuesday.

The US Covered Bonds Council met on Friday, but the development of covered bonds in the US is being held up on continued uncertainty over the Federal Deposit Insurance Corporation’s plans.

The Canadian Bankers Association (CBA) earlier this month submitted a proposal for a covered bond legislative framework to the Canadian government.

Panellists at the American Securitization Forum conference in Las Vegas said on Tuesday that the credit crisis had opened up new opportunities for covered bonds in the US, even as it had called into question the idea that they are a rates product rather than a credit product.

In this roundtable, representatives of Canada's leading banks exchanged their views on the prospects for covered bonds in the country, and on how Canada’s economy, banking sector and mortgage market are very different from those of its neighbour.

Covered bonds are expected to be eligible for government guarantees under a planned extension of the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Programme (TLGP) that was announced on Friday.