North America

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.

CIBC has mandated ABN Amro, CIBC, Commerzbank, Merrill Lynch and HSBC to lead manage its debut covered bond. The bank will be roadshowing late this month.

When Don McLean sang “Bye-Bye, Miss American Pie” he was apparently expressing his feelings on the transition from the innocence of childhood to the darker realities of adulthood. Covered bond issuers at the Euromoney US Covered Bond Investor Forum in New York earlier this month faced up to a similar mood of disillusionment.

Ronald Reagan once famously declared: “There are no such things as limits to growth, because there are no limits on the human capacity for intelligence, imagination and wonder.” Covered bond issuers and regulators at the Euromoney US Covered Bond Investor Forum in New York last week may not be as unconstrained in their hyperbole as the former US president and star of hit film Bedtime for Bonzo, but they enthused how covered bonds could grow in the face of regulatory limits and their interaction with retail depositors.