UK

Lloyds TSB has set up three companies typical of those established by UK financial institutions working on covered bond programmes, suggesting the bank is preparing to enter the market.

Leeds Building Society yesterday (Wednesday) became the second building society in a week to set up a covered bond company, Leeds Covered Bonds Holdings Limited.

Principality Building Society, the largest building society in Wales, has set up two covered bond vehicles, joining the ranks of other building societies that have taken the first step towards covered bond issuance.

In brief: The Co-operative Bank is launching what is believed to be the first issue off its £3bn covered bond programme.

Nationwide Building Society is in merger talks with Derbyshire and Cheshire, which turned to the larger institution because of difficulties they are facing. The planned merger has not affected Nationwide’s ratings.

In brief: Newcastle Building Society is the latest UK financial institution to turn to covered bonds, The Cover has learnt.

In light of the succession of UK mortgage lenders establishing covered bond programmes over the past year, The Cover spoke to some of the biggest names still absent from the sector to find out if they are preparing to enter the market.

In brief: Moody’s today (Friday) downgraded Bradford & Bingley’s covered bonds to Aa1 over concerns that the bank’s proposals for raising the level of protection offered in terms of both expected loss and timely payment fall short of what is necessary to retain a triple-A.

Alliance & Leicester yesterday (Monday) priced only the second UK residential mortgage backed securities issue of the year to be placed with third party investors, offering a hint of respite to the UK banking sector. Meanwhile Nationwide Building Society is setting up an Irish operation that will give it access to European Central Bank funding.

Mervyn King, the governor of the Bank of England, delivered a stern put down to supporters of proposals to lift the UK mortgage funding market this week, disappointing those charged with mortgage financing.

Bank of Ireland has set up three covered bond related vehicles in the UK, The Cover has learnt, suggesting that it could be setting up a programme under UK legislation. The bank already issues Irish asset covered securities through Bank of Ireland Mortgage Bank.

Chelsea Building Society’s covered bond plans have been in the works since well before the Bank of England set up its Special Liquidity Scheme, according to an official at the mortgage lender, and the institution is intending to issue in the public markets.