UK

Britannia Building Society has set up a covered bond programme, just a few days after Moody’s downgraded the covered bonds of Chelsea Building Society and put those of seven other UK issuers on review for downgrade.

The UK financial institutions affected by last week’s negative rating actions from Moody’s are exploring ways of staving off downgrades of their covered bonds and alternative means of accessing liquidity should they fail to do so. However, the fate of Chelsea Building Society’s covered bonds, which suffered a three notch downgrade, is unclear.

Fitch yesterday (Thursday) affirmed the AAA rating of Allied Irish Bank Mortgage Bank's residential mortgage covered securities and Bank of Ireland's UK covered bonds. However, a recent downgrade of the issuers, which are the swap counterparties for their covered bond programmes, means that remedial action is necessary.

Better than expected first-quarter bank results and unguaranteed bond supply from lower rated financial institutions gave market participants in Europe and the US hope that the market is on the road to recovery this week.

Moody’s yesterday (Thursday) downgraded Chelsea Building Society’s covered bonds from Aaa to Aa3 and put them and the triple-A rated covered bonds of seven other UK financial institutions on review for downgrade, after taking action on their issuer ratings on Tuesday.

Moody's yesterday (Tuesday) took multiple negative rating actions on UK mortgage lenders, including one four notch downgrade, because it is concerned that they will face higher credit losses than previously anticipated.

Standard & Poor's yesterday (Monday) announced that its ratings of Nationwide Building Society are unaffected by the institution’s takeover of selected assets and liabilities of Dunfermline Building Society, the Scottish building society that was yesterday declared effectively insolvent.

Moody's is investigating whether certain provisions of the UK Banking Act may negatively affect covered bonds and structured finance transactions.

The Financial Services Authority’s Covered Bond Standing Group (CBSG) is setting up a UK covered bond trade association, The Cover understands.

The Financial Services Authority gave an insight into its position on covered bonds at IMN’s Global Covered Bonds conference in London last Thursday, describing how its policy has evolved in response to the financial crisis.

Britannia Building Society looks set to become a covered bond issuer after making what appear to be the necessary steps towards setting up a programme.

Caixanova has finally opened books on its first government-guaranteed issue, albeit at the widest spread yet for a Spanish issue. Meanwhile, Dexia and Lloyds yesterday (Tuesday) set new benchmarks for size in the government-guaranteed asset class.