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Regulatory developments

  • EBA lets covered bond issuers off the hook on swaps

    The European Banking Authority proposed this week that covered bond new issue swaps should receive special treatment, ending months of uncertainty over derivatives proposals that could have delivered a fatal blow to the covered bond market.

  • Large exposure rules may hit Danes

    Covered bonds are currently exempted from large exposure rules set out in the fourth iteration of the capital requirement directive. But this could change in 2019, if newly released proposals set out by the Basel Committee on Banking Supervision (BCBS) are put into place. Though the restrictions will reduce the appeal of covered bonds, it should not be a problem in practice for most countries except Denmark.

  • NSFR proposal leads to unstable funding

    The Swedish Bankers Association has published a letter to the Basel Committee on Banking Supervision which says that the Net Stable Funding Ratio (NSFR) would cause banks to rely less on covered bond funding, and more on alternative sources which are not as stable.

Analyst research

  • French ESNI a close cousin of CBs and likely QE fodder, says BBVA

    The new Banque de France SME funding vehicle could be used for ECB quantitative easing, says BBVA. The Spanish bank’s research team say that, given the ECB’s new readiness to fund SME assets through QE, the Banque de France programme could be the ideal vehicle to channel these funds.

Mandates & deal pipeline

  • Bank of Montreal lines up

    Bank of Montreal’s (BMO) covered bond programme was recently signed off by the Canadian Mortgage Housing Corporation (CMHC), giving rise to speculation that it could return to the covered bond market after Easter with a newly set up programme and a legally compliant covered bond deal. A still-favourable cross currency swap suggests it could become the fourth Canadian bank to issue in euros this year.

Deal reviews

  • SG gets great execution by limiting deal size

    Société Générale returned to the covered bond market on Tuesday after a four month absence to issue the sixth French covered bond deal of the year and the third from France with a 10 year maturity. By limiting the deal size, leads were able to price flat to its curve, and with barely any premium to the French government.

  • BHH scores success as Ukraine’s woes fail to upset

    After mandating leads for a roadshow at the end of March, Berlin Hypothekenbank (BHH) opened books on Monday for what bankers believe could be the one and only covered bond issue of the week. Though the deal had been widely anticipated, bankers said Ukrainian headline risk could have derailed timing.

Rating news

  • Nine multi-Cédulas downgraded to junk by S&P

    Standard & Poor’s downgraded nine multi-Cédulas from investment grade to sub investment grade on Tuesday, along with a further 11 downgrades, five upgrades and three affirmations. The actions, which were driven by the agency’s CDO methodology, and affect €49bn of securities, were flawed, say bankers.

  • Postbank: what serves the rating agency may not serve the regulator

    Deutsche Postbank AG announced it has entered into a voluntary commitment to maintain nominal overcollateralisation (OC) of its mortgage cover pool above the statutory legal minimum. The commitment was triggered by Fitch’s negative rating action on its covered bonds, which will quickly be remedied, the agency told The Cover. However, whether voluntary overcollateralisation will be there for investors in the event of an issuer’s insolvency under new regulatory arrangements is an open question.

  • Less stringent NSFR may promote growth – S&P

    The latest Basel proposals regarding the net stable funding ratio (NSFR) have been relaxed, in a move possibly motivated by the political will to ensure lending to the real economy, said Standard and Poor’s in a report published on Monday. Bankers said that covered bonds can provide a useful tool for banks to extend the average duration of their liabilities, helping to meet their NSFR target.


  • Bigger banks aren't always stronger

    A bigger bank is not necessarily the same as a stronger bank, which is why the Bank of Italy’s draft proposal redefining which borrowers can issue covered bonds should be applauded.

In-depth analysis and interviews

  • An end to 10 years of hurt for the once mighty Pfandbriefe

    With redemptions set to exceed issuance for a year or two longer, Pfandbrief spreads are expected to remain tight. But as regulatory uncertainty dissipates, both mortgage and public sector backed supply should begin to take off again. Could this be the start of a new era for this, the most revered and established of all covered bond sectors?

  • Covered bonds take the helm in Italy’s funding renaissance

    A flurry of issuance from banks has led to a positive outlook for the Italian covered bond market, as financial institutions — old and new — move away from central bank liquidity.

  • Waiting for the icing on the resolution cake

    The closer the EU’s bank resolution rules come, the better for the covered bond market, as it is excluded from any possible bail-in plans. But despite the assurances that covered bond investors will escape a bail-in, nobody knows exactly how. Uncertainty remains over covered bonds and liquidity too, with increasingly strident briefing and counter-briefing on whether to count covered bonds in the top class of regulatory liquidity.

  • Issuers rule, as long as they’re careful

    With deleveraging nowhere near finished and loan growth in most European banking sectors sluggish, covered bond bankers are struggling to see an end to dwindling supply and tightening spreads. The Cover goes in search of anything that could buck the trend.

Secondary market

  • Covered bond FRNs offer untapped potential

    Covered bond investors agree with survey evidence that covered bond floating rate note (FRN) issuance has plenty of potential, as the format is a perfect way to secure an extra yield without being concerned about exposure to duration, which can be particularly harmful in times of volatile interest rates.

Market wrap

  • Moody’s boosts CaixaBank outlook amid growing Spanish optimism

    Moody’s announced a positive rating action on CaixaBank on Friday, reflecting declining asset-quality pressures, and an improvement in its earnings. The news comes as its most recent deal has performed well, and amid growing expectations that the worst is behind for the Spanish economy. With the interest rate outlook likely to remain constructive and Cédulas likely to stay technically squeezed, the sector’s performance outlook has not looked this good in years.

  • Covered bond supervision questioned under banking union

    Banking union, the single supervisory mechanism and the single resolution fund should theoretically sever the sovereign-bank link, said representatives of the European Commission, the European Central Bank and the European Banking Federation at the European Covered Bond Council’s plenary session in Paris. However, the authorities did not actually know who ultimately had the responsibility to grant or take away a covered bond bank’s license which left delegates wondering who would ultimately be responsible for covered bond supervision.

  • French law update on the way

    The French covered bond legal framework is in the process of being redrafted with an updated and improved law expected to emerge, possibly before summer, said panellists at the European Covered Bond Council’s plenary session in Paris on Thursday.

RMBS primary news

  • RMBS to unlock capital for French banks

    Some of France’s biggest banks are set to give the country’s meagre RMBS market a boost this year as they set up programmes in response to regulator pressure to free up capital.

People moves

  • Hoggett latest to leave BAML’s DCM platform

    Julia Hoggett is leaving Bank of America Merrill Lynch to join the Financial Conduct Authority (FCA), to run the investment banking supervision division, starting in early May. Her departure follows a string of high profile exits from the firm.

Deals tracker

Priced Deals

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Deals pipeline

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Book runner

Covered bonds €500m+ to April 9  2014

Lead manager Amount
No of Issues Share %
1 BNP Paribas 4.39 18 10.6
2 UniCredit 3.51 23 8.5
3 Natixis 3.09 16 7.5
4 Barclays 2.55 13 6.2

 league table builder

All covered bonds to April 9 2014

Lead manager Amount
No of Issues Share %
1 BNP Paribas 6.41 22 8.6
2 UnCredit 6.28 41 8.4
3 Natixis 5.69 21 7.6
4 UBS 3.64 21 4.9

 league table builder