Italian banks are looking at ways of structuring a covered bond in the event the government does not enact a covered bond law or if it takes too long to pass. Banks such as Monte Paschi Dei Siena are studying ways to issue covered bonds without a law because the cost savings versus residential mortgage-backed securitizations is significant, notes Anna di Paolo, head of structuring at MPS Finance, Monte Paschi Dei Siena's investment banking unit. The effort is noteworthy because Italy tends to issue new laws to develop financial markets whereas in the U.K., for example, markets for new assets tend to evolve on their own without legislation.
Di Paolo says she expects the first Italian covered bonds to emerge within the first six months of 2004. "As soon as one bank does one, others will follow," she says. "HBOS' deal sets a good precedent for creating a covered bond without a specific covered bond legal structure," says Tim Skeet, head of the European bank coverage group at ABN AMRO in London. "One way or another, Italian banks will access the market, because it is liquid, deep and cost-efficient," he adds.
IntesaBCI has already confirmed it would like to issue a covered bond (BW, 8/11). Banca Nazionale del Lavoro and UniCredito Italiano are also said to be looking at covered bond deals. Officials at these banks did not return calls.