The Covered Bond Report Issue 3


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The Covered Bond Report Issue 3

  1. 1. The CoveredBond July 2011 Fall of the sovereign Will covered bonds rise amid the ruin?CRD IV Canada ICMAEverything to play for Rules and legislates Anti-whispering campaign
  2. 2. Coveredbonds? Highly rated covered bonds backed by mortgages Average LTV of 60.5% Match-funded structure Core capital ratio of 18.6% Largest mortgage bond issuer in as of 17 March 2011
  3. 3. The CoveredBond Report CONTENTS22 Cover Story SOVEREIGNS VERSUS COVERED 22 Fall of the sovereign Sue Rust reports. FROM THE EDITOR5 3 It’s all in the timing MONITOR 5 Legislation & regulation 11 Ratings 15 Market15 20 People July 2011 The Covered Bond Report 1
  4. 4. The CoveredCONTENTS Bond Report30 CRD IV: GAME ON 30 Everything to play for Neil Day CANADIAN MOMENTUM 36 Canada rules and legislates36 Maiya Keidan ANALYSE THIS: SOLVENCY II 42 It’s the end of the world as they know it FULL DISCLOSURE 49 From fairway to oche422 The Covered Bond Report July 2011
  5. 5. FROM THE EDITORIt’s all in the timing W ould the European Commission’s CRD IV proposals have been more definite in a less uncertain world? Merely publishing a timely and relevant magazine is fraught enough without the fate of the euro-zone changing on a daily basis. Producing an inter- national framework that will see the financial system safely through its ups and Lehmans is asking for trouble at any time — even more so when a euro-zone sovereign is on the verge of defaulting. Small wonder that the EC passed on most of the big decisions, leaving the European Banking Authority to carry the can. Would Commissioner Barnier really have stood up and declared sovereign debt to be the nec plus ultra of liquid assets a day before haircuts for Greek bondholders were revealed? The Covered That said, leaked drafts of the EC proposals seen by The Covered Bond Report suggest that the decision to Bond Report leave open a final definition of liquid assets was not taken at the last minute. However, this should only give en- couragement to covered bond supporters, some of whom have already taken heart from being offered a second op- Editorial portunity to lobby for better treatment. Managing Editor Neil Day +44 20 7415 7185 What the Commission did lay down, though, was a tough wish-list for the EBA to use when examining which Deputy Editor Sue Rust asset classes are fit for liquidity buffers. To name but three: a proven record of price stability; maximum bid/ask spreads; Reporter Maiya Keidan and transparent pricing and post-trade information. While the list of criteria is welcome in that it gives everyone a clearer idea of what needs to be done to win Design & Production Creative Director: Garrett Fallon over the EBA, satisfying them will be no easy task. Is the Senior Designer: Sheldon Pink covered bond industry up to the challenge? Four years have now passed since the onset of the Printing crisis and in many of these areas little progress has been Wyndeham Grange Ltd made. Less time remains until implementation in 2015, let alone until the EBA reports back to the Commission. Advertising Sales The clock is ticking. Subscriber Services The Covered Bond Report July 2011 Editorial Fall of The Covered Bond Report is a the sovereign Newtype Media publication Will covered bonds rise amid the ruin? 25, Finsbury Business Centre 40 Bowling Green Lane London EC1R 0NE +44 20 7415 7185 CRD IV Canada ICMA Everything to play for Rules and legislates Anti-whispering campaign July 2011 The Covered Bond Report 3
  6. 6. The CoveredBond ReportThe Covered Bond Report is not only a magazine, but also awebsite providing news, analysis and data on the market.Did you know that The Covered Bond Report has its own databaseof benchmarks?Did you know that we link directly from bond data to relevant coverage?Did you know that we include price guidance, book sizes anddistribution statistics?Did you know that you can run league tables by country and currency?To register for trial access to The Covered Bond Report, or contact Neil Day, Managing Editor, And don’t forget: if you are an investor incovered bonds you can qualify for free access to the website.
  7. 7. MONITOR: LEGISLATION & REGULATIONLegislation & RegulationUNITED STATESFDIC fight ahead after bill passesStark and potentially unbridgeable di-visions between the FDIC and coveredbond proponents led by Republican Con-gressman Scott Garrett were laid bare asthe House Financial Services Committeepassed the United States Covered BondsAct of 2011 on 22 June. Garrett complained of a breakdown incommunications with the regulator whileformer HFSC chairman Democrat Bar-ney Frank tried to introduce two amend-ments at the behest of the FDIC that theRepublican said would render the billineffective. And although FDIC chairman SheilaBair’s term of office ended in July, cov-ered bond supporters already fear thather expected successor, Martin Gruen- Will Martin Gruenberg take over Sheila Bair’s position?berg, will adopt a similar stance andplace obstacles in the way of the develop-ment of a US market. that “both would have hurt the develop- that Frank had enjoyed “a positive work- Garrett’s bill — co-sponsored by ment of the market”. ing relationship and dialogue with theDemocrat Carolyn Maloney — was ulti- “The repudiation power in the re- FDIC”, before saying:mately passed by a comfortable 44 votes jected amendment was better for inves-to seven, but the potential pitfalls facing tors than the FDIC’s current repudiation “The FDIC decidedthe proposed legislation on its way tobeing signed into law were laid bare by power because the amendment required the FDIC to pay off investors in full rather to stop responding tovotes on Frank’s amendments. Although than up to the market value of the cover our staff’s e-mails”Garrett warned that “you would no long- pool,” said the rating agency. “However,er have a covered bond marketplace” if the amendment would have exposed in- “Would that it be the case that we hadthe amendments were passed, they were vestors to an early pay-off, which existing continued to have that relationship withonly narrowly defeated, each by 28 ayes covered bond investors do not want. the FDIC as well. I thought we had it for ato 26 nays. “Furthermore, a cap on the amount long period of time and members on the Frank’s amendments would have giv- of overcollateralisation would reduce the other side of the aisle, their staff knowsen the FDIC more far-reaching powers resiliency of covered bonds, preventing that we engaged in numerous hours ofthan those envisaged in Garrett’s legisla- issuers from adding collateral to main- staff to staff discussions on various por-tion. Frank said that his first amendment tain the credit strength of the covered tions of the bill, but I will point out thathad been drafted in close co-operation bonds if the issuer deteriorates.” that for some reason or another, despitewith the FDIC, which he said was con- those ongoing discussions that we werecerned not with the concept of covered Concerns addressed able to continue to have on a member tobonds, but the extent to which it and the ‘time and time again’ member and staff to staff member levelDeposit Insurance Fund are protected. Garrett pointed out that an earlier ver- here in the House, the FDIC, for what- The amendments would have al- sion of the bill that had contained less ever reason, decided to stop respondinglowed the FDIC to repudiate covered protection for the FDIC had been passed to our staff ’s e-mails.bonds following a bank default and by the committee last year under the “So as of last week those aspects ofwould have capped maximum overcol- chairmanship of Barney Frank with bi- discussions that we would want to havelateralisation levels and after the hearing partisan support, including that of Frank. with the FDIC came to an abrupt halt.Moody’s backed up Garrett by saying Garrett went on to say that he noted We were sending over e-mails as to what July 2011 The Covered Bond Report 5
  8. 8. MONITOR: LEGISLATION & REGULATIONwe thought we could do to improve the Maloney said that the FDIC support- The end of Bair’s term as chairmanbill to make changes to address their ed the amendment, which she said was had held out the prospect of a change inconcerns, and those ended at that point designed to give the regulator as much the FDIC’s position, but there have al-in time.” flexibility as possible and to protect the ready been signs that acting chairman Garrett went on to say that while he Deposit Insurance Fund. The FDIC had Martin Gruenberg will adopt a similarwas pleased that member to member dis- argued that it is more difficult to sell off position to his predecessor. DBRS, forcussions could continue, he could not sup- a covered bond programme than other example, suggested this might be theport Frank’s amendment because of what banks’ assets and products, particularly if case in mid-July when discussing lob-he said it would lead to: “There would not a number of institutions are failing. bying of the FDIC to relinquish its firstbe any investors interested in the market- right to cover pool assets in the event ofplace were this amendment to pass.” “The legislative an issuer default. He said that Frank’s amendmentswould introduce too much uncertainty calendar has “Vice chairman of the FDIC Martin Gruenberg, who some believe will beinto the instruments, such that investors become a serious President Obama’s choice to succeedwould either not be interested in them oronly at a price that would not make them consideration” Chairman Bair, recently reiterated a variation of this position stating that inviable. He went on to point out several An amendment allowing a covered the event of a bank failure, the FDIC,ways in which the different versions of bond issuer’s regulator to place a cap on and not investors, should have firstbills he has introduced had progressively covered bond issuance relative to total rights to any excess collateral includedincluded more and more concessions assets was approved. This was introduced in a covered-bond offering,” said theto the FDIC over more than two years, by Republican John Campbell, who had rating agency.“time and time again”. expressed disapproval of the bill in a sub- There are also fears that time could be HFSC chairman, Republican Spen- committee markup in May but ultimately running out for legislation to be passedcer Bachus, also said that the com- voted in favour of the bill. He said that in this Congress. While the HFSC votemittee had “tried very hard to accom- the possibility of including a number had and Republican control should smoothmodate the FDIC”, which had, he said, been discussed, but that this would be left the bill’s passage through the House ofonly the day before indicated that it to regulators rather than legislated for. Representatives, observers are less cer-had three problems with the bill that The FDIC has previously set a 4% limit. tain about the Senate.were being addressed. “The length of the remaining legisla- tive calendar has become a serious con- Reconciliation impossible? sideration, particularly for Senate ac-Frank responded by acknowledging that tion,” said Jerry Marlatt, senior of counselthere was a clear difference of opinion at Morrison Foerster. “The Senate has notbetween the FDIC and those pushing for previously considered a covered bondcovered bonds. He said that those sup- bill and, accordingly, there is much to beporting the bill had “overestimated” the done for the Senate staff to be preparedextent to which agreement with the FDIC to take informed positions on a bill. Per-had been reached. haps the most important factor in mov- Two amendments that offered con- ing a bill quickly through the Senate willcessions to the FDIC were nevertheless be who sponsors the bill.approved. “As previously reported, Senator One, from Democrat Carolyn Charles Schumer (D-NY), who is a keyMaloney, co-sponsor of the bill, extends senator on the Senate Banking Com-from 180 days to one year the period the mittee, has said that he would considerFDIC has to find an institution to take introducing a covered bond statute.over a covered bond programme in the Barney Frank: supporters of bill Sponsorship by Senator Schumer wouldevent it is appointed conservator or re- overestimated any agreement with FDIC greatly enhance the prospects for the billceiver of a failed issuer. moving quickly.”6 The Covered Bond Report July 2011
  9. 9. MONITOR: LEGISLATION & REGULATION “Covered bonds could be observed trading through government bonds” page 24SOUTH KOREAKorean rules raise solo supply hopesThe prospect of standalone covered bond with legally binding regulations on cov-issuance from South Korean banks has Key features of ered bond issuances,” said the regulators.increased following the release of covered Korea’s guidelines: Jerome Cheng, vice president, seniorbond guidelines by the country’s regula- credit officer at Moody’s, told The Coveredtors in late June. or greater Bond Report that the establishment of a The Financial Services Commission covered bond framework has been under(FSC) and Financial Supervisory Service of total liabilities discussion for quite some time.(FSS) described the guidelines as part of “Market participants have been lobby-measures to implement “Comprehensive ing government to enact a law or publishMeasures on Household Debt”. guidelines,” he said. “From market par- “The guidelines are intended to pro- vehicles under the Act on Asset-Backed ticipants’ perspective, having guidelinesvide a framework for covered bond issu- Securitization. will allow originators to structure coveredances, diversifying banks’ financing in- The cover pool may comprise: first bonds with a higher degree of certainty.struments and encouraging banks to offer priority mortgage loans with maximum “The guidelines, which we have not yetmore long term and fixed rate mortgage secured amounts of 120% or more of the assessed, should give additional comfortloans instead of short term and floating actual loan amount, a 70% loan-to-value to investors.”rate ones,” said the FSC and the FSS. cap, and no delinquencies in excess of 60 Previously only one Korean bank has The “best practice guidelines” run to a days; cash; ABS backed by such mortgage issued a covered bond on a standalonemere two pages, but contain rules on key loans or cash; mortgage backed bonds is- basis — Kookmin Bank, with a $1bn is-features of issuance — see box. sued by Korea Housing Finance Corpora- sue in 2009. State-run KHFC sold a sec- Issuers permitted under the guidelines tion (KHFC); and mortgage backed secu- ond international covered bond issue — ainclude banks, agricultural and fishery rities issued by KHFC. $500m five year — on 18 July, but its issu-co-operatives, the Korean Development “After monitoring the issuances of cov- ance is under an act governing the insti-Bank, Export-Import Bank of Korea, In- ered bonds in the future, we will have fur- tution and the bond is backed by pooleddustrial Bank of Korea, and securitisation ther discussions on whether to come up collateral from its member banks. AUSTRIA Forum discusses steps to uniform law Moves towards harmonising Austria’s would be the ultimate outcome of work Mortgage Banking Act, while Kommu- covered bonds under a single law were to improve the Austrian framework. nalkredit Austria and Bawag PSK issue discussed at the first conference of the “We are heading towards one law,” he Fundierte Bankschuldverschreibungen. Österreichisches Pfandbrief und Cov- said. “But before that there will definitely The Österreichisches Pfandbrief und ered Bond Forum at the end of May. be intermediary steps to further harmo- Covered Bond Forum was launched in According to DZ Bank covered bond nise the existing ‘two-plus’ frameworks. January by Austria’s leading covered analyst Michael Spies, representatives “There will be harmonisation in bond issuers, representing Bawag PSK, of the Austrian central bank (Oesterrei- terms of transparency, in terms of fur- Erste Group, Kommunalkredit Austria, chische Nationalbank) and the finance ther quality improvements.” Österreichische Volksbanken, Raiffeisen ministry said that the harmonisation of Austrian covered bonds are either Bankengruppe, UniCredit Bank Austria, laws governing Austrian covered bonds Pfandbriefe issued under the Mortgage and Hypoverband. would be on their agenda. Banking Act, which in 2005 brought Schweitzer said that the forum Martin Schweitzer, speaking on be- together the old Mortgage Banking would not only be working on legisla- half of the Österreichisches Pfandbrief Act and the Pfandbrief Law, or Fundi- tive changes. und Covered Bond Forum, told The erte Bankschuldverschreibungen. Er- “It’s about transparency in the market, Covered Bond Report that a single cov- ste Group Bank and UniCredit Bank speaking with one voice, and being vis- ered bond law was not imminent but Austria, for example, issue under the ible on the European stage,” he said. July 2011 The Covered Bond Report 7
  10. 10. MONITOR: LEGISLATION & REGULATIONTRANSPARENCYFirst CBIC responses favourableThe Association of Swedish Covered Bond However, the Austrian association initiative and would recommend its mem-Issuers (ASCB) and the Pfandbrief & Cov- (Österreichisches Pfandbrief und Cov- bers have common cover pool informationered Bond Forum Austria have welcomed ered Bond Forum), which got back to the set up “largely in line with your proposal”.an ICMA Covered Bond Investor Council CBIC, said that it would need a couple The association disagreed on severaltransparency initiative in responses to a more weeks to agree a common Austrian points it said were of a more “technical na-consultation on the proposed standards, position, and other national associations ture”. For example, the ASCB took issue withbut several national groupings have said were not in a position to respond by the a suggestion that issuers should have to pro-they need more time to consider them. deadline. The Italian Banking Associa- duce margin calculations, saying that these Responses to the consultation were due tion (ABI) was due to meet to prepare a were not always available or appropriate. Itby 30 June and a spokesperson for the CBIC response as The Covered Bond Report also said that it did not see why breaking outsaid that the consultation had in general was going to press, said an official at the covered bond funding into bearer and regis-been received quite positively. The Euro- association. The Covered Bond Report tered formats was necessary.pean Covered Bond Council — also speak- understands that the Association of Ger- The Swedes noted that some data fieldsing for some national associations — and man Pfandbrief Banks (vdp) had not yet suggested by the CBIC were not relevantEuropean Central Bank are understood to formally submitted a response. in their case as most Swedish issuers arebe among those parties that contributed to Sweden’s ASCB said in a submission specialised mortgage entities that do notthe consultation by the deadline. dated 27 June that it welcomed the CBIC conduct other business. ECBC DATA Issuance rises, ECB share falls The volume of covered bonds outstand- do not accurately reflect the amounts They also looked at volumes in the ing rose to Eu2.5tr in 2010, according backed by residential mortgages. two asset classes relative to their use as to data published by the European Cov- Landesbank Baden-Württemberg European Central Bank collateral and ered Bond Council, as their funding role analysts compared mortgage backed found that fewer than 18% of eligible gained in prominence. covered bond volumes with mortgage covered bonds are being used for refi- In 2009 outstanding covered lending volumes and ABS issuance. They nancing via the Eurosystem — less than bond volumes were Eu2.4tr. Last year found that even in countries where se- in 2009 and compared with 38% of Eu606.7bn of new covered bonds were curitisation has been increasingly used, available ABS. issued, versus Eu529.8bn in 2009. such as Italy and Portugal, covered bond “In other words, considerably more Denmark had the highest total issu- funding has increased its share of hous- covered bonds were placed in the mar- ance last year, at Eu148.6bn, followed ing finance. In the UK the share of RMBS ket or not acquired with the immediate by Germany (Eu87bn) and Sweden has fallen over the last two years, while intention of using them as collateral,” (Eu80bn). covered bonds have held steady. they said. Mortgage backed covered bonds’ share of the total increased, with public 16,000 32.0% sector covered bonds standing at only 14,000 28.0% 24% of issuance in 2010, down from 12,000 24.0% 10,000 20.0% 29% in 2009 and 58% back in 2003. 8,000 16.0% The ratio of mortgage backed covered Volume of assets 6,000 12.0% bonds outstanding relative to outstanding considered eligible 4,000 8.0% and the share of mortgage loans increased in all countries deposited covered 2,000 4.0% aside from the UK and Germany, where bonds in the total 0 0.0% eligible volume of the ratio remained the same — although 2004 2005 2006 2007 2008 2009 2010 covered bonds (rhs) in Germany, and some other countries, total eliible collateral (€bn) eligible covered bonds (€bn) Sources: ECB, LBBW mortgage backed covered bond volumes covered bonds used as a % of eligible cb (rhs) Credit Research8 The Covered Bond Report July 2011
  11. 11. MONITOR: LEGISLATION UK “Sovereign investors are more vulnerable to potential haircuts” page 25RCB REVIEWIMA cites weaknesses in UK consultationThe Investment Management Asso- the review was announced. However,ciation believes UK Regulated Covered the IMA said that the introduction of Jane Lowe: “It might benefitBonds lack “the very high degree of bail-ins of senior debt might affect the from more significant change.”certainty” that should be expected of a RCB regime and that to maintain inves-regulated product, and that the frame- tor confidence the RCB should be clear-work needs more significant changes ly carved out of bail-in requirements.than those being proposed in a review. “This is particularly important as In its response to a consultation on in contrast to many EU RCB regimes,proposals announced in April by HM a UK RCB is a senior unsecured bondTreasury and the Financial Services Au- and only becomes ‘secured’ by way of athority, which ended on 1 July, the IMA guarantee on ‘default’,” said the associa-said that it was unfortunate that, as be- tion. “In a special resolution situation,fore the UK framework’s introduction this means that the guarantee may notin 2008, it was not pre-consulted on re- be triggered under the relevant contractform proposals. because the issuer is not deemed to be “This is unfortunate since it would ap- in default.”pear that an assumption has been madethat the regime needs little change, where- Investor data demands conflictas we would argue that it might benefit The IMA said that covered bonds havefrom more significant change,” said Jane been increasingly taken up by its mem-Lowe, the IMA’s director of markets. bers in the past year but that they have not found the documentation “user- “Key information is friendly”. “Key information is frequently bur- frequently buried” ied deep within detailed prospectuses (400+ pages is not unusual),” said the The association outlined several con- IMA. “Whilst they are able to managecerns relating to the transparency and this, we question why it should be nec-structure of UK RCBs, and urged HM essary for a regulated product.”Treasury to tackle these, even if such re- The association argues in favour ofform was not envisaged in the timetable disclosure of loan level data in line withfor the review of the framework. Bank of England requirements. “Covered bond pools need to be “For investors, the RCB regime is “This is a much needed measure to monitored by investors but maybe notlacking the very high degree of certainty improve investor confidence and trans- nearly as frequently as ABS pools asthat should be expected of a regulated parency for Regulated Covered Bonds,” long as the pool is fairly elitist fromproduct,” said the IMA. “For issuers, the it said. its creation onwards and substitutionregime runs the risk that over time it However, the Covered Bond Investor mechanisms are in place,” said the coun-will fail to attract long term stable inves- Council said in a response to the con- cil, which has called for aggregated datators into the product. sultation that loan-by-loan disclosure it believes would be more useful. The “If the impact of bank resolution and of cover pool assets, as required by the dynamic nature of cover pools makesbail-in extends also to the RCB regime, Bank of England, “would contaminate regular loan-level disclosure superflu-this is likely to lead to a gradual with- the reputation of high quality the cov- ous, it added.drawal of long term investors from bank ered bonds product has in the market”. The level of transparency that inves-funding, leaving banks with a different Asset backed securitisation (ABS) tors should be provided with was theand probably less stable investor base.” products and covered bonds need to only point of contention raised in the Some market participants had sug- be distinguished, it said, in particular CBIC’s submission, with the council say-gested that such bail-in questions might with respect to the level of information ing that it is “generally positive” towardhave been sufficiently addressed when required. the changes proposed by the review. July 2011 The Covered Bond Report 9
  12. 12. MONITOR: LEGISLATION & REGULATIONSPAINFull recourse withstands populist moveRecent amendments to Spain’s legalframework for mortgage loans weakencreditors’ recourse to low income borrow-ers, but preserves full recourse mecha-nisms in the Spanish market, according toFitch and Moody’s. Spain’s parliament passed a resolu-tion, Royal Decree 8/2011, on 30 Junethat, among other changes, increases thethreshold of defaulted borrower incomethat is ring-fenced from a claiming credi-tor. The new law became effective on 7July, and was put forward by the ruling So-cialist party, the main opposition People’sParty and Catalan group Convergencia i Source: Plataforma Afectados por la HipotecaUnion, demonstrating widespread sup-port for the move. it continues to consider the Spanish debt tailing the rights of creditors to attach the Alvaro Gil, director, covered bonds at market as one featuring full recourse. wages of borrowers who default on theirFitch, said that a motivation behind ini- “Fitch recognises that there are many mortgage loans”.tiatives to end or modify full recourse was disincentives that a sensible borrower will But it said that this measure will havethe large number of legal cases for repos- consider before defaulting on its mortgage a negligible impact on the Spanish RMBSsessions since 2008. There have also been loan to take advantage of the newly-ap- market because most of a mortgage loan’srecent protests in support of borrowers proved measures,” it said. recovery stems from the effective sale offacing repossession. Such disincentives include the alterna- a property, and not from the personal li- According to statistics from the Span- tive costs of occupancy such as property ability remaining against a mortgage bor-ish judicial system cited by Moody’s, the rental or the potential loss of fiscal ben- rower if the foreclosure process ends withnumber of foreclosures reached 93,000 in efits, according to Fitch. any debt outstanding.2010, up 260% from 2007 levels. Fitch said The new framework also raises thethat legal cases for repossessions since “Incentives to repay minimum percentage of the property2008 totalled 240,000. are still in force” value – from 50% to 60% – at which a Under Spanish law mortgage borrow- bank can repossess a mortgaged propertyers remain personally liable for their debt “The full recourse mechanism over if the foreclosure process ends with noafter foreclosure, instead of being able, as borrower’s existing and future assets per- offers. Carlos Terre, director, structuredis the case in some countries, to discharge sists by law, and would disqualify default- credit at Fitch, said this will shift poten-that debt in bankruptcy. ed borrowers from owning other assets or tial losses from the obligors’ side to the “Full recourse to current and future as- from generating additional income in the banks’ side, but that the rating agencysets and income of the obligor is system- future,” it said. considers the effect on recovery assump-atically used by banks to ensure full re- In Fitch’s view the new law could trig- tions to be neutral.covery on defaulted mortgages when the ger a tightening effect on mortgage under- Moody’s highlighted a third amend-foreclosed property value at auction does writing policies, in particular with regards ment, which reduces the amount that anot cover the outstanding debt,” said Car- to loan-to-value ratios for low income party has to deposit upfront to participatelos Masip, director, RMBS at Fitch. borrowers. at a property auction. The rating agency said that although Moody’s said that the revised frame- “Lowering the liquidity require-newly approved changes to Spain’s mort- work introduces three main changes. A ment may attract more bidders; the thirdgage loan framework may reduce the first involves raising the threshold that full amendment may thus be considered cred-strength of full recourse from a cashflow recourse to a defaulted borrower’s exist- it-positive, so long as it forms an incentiveperspective, in particular for low income ing and future income is applicable to, a for third parties to bid at mortgage auc-borrowers in negative equity situations, change that Moody’s described as “cur- tions,” said Moody’s.10 The Covered Bond Report July 2011
  13. 13. MONITOR: RATINGSRatingsMOODY’S‘Unprecedented’ move blocks BayernLB dealBayerische Landesbank put on hold a had the mandate for the transaction andnew covered bond issue on 6 July in re- a syndicate official at one of the leads saidsponse to Moody’s that morning plac- that preparations for the transaction hading its Pfandbrief ratings on review for gone very well, and that the decision to notdowngrade alongside those of three oth- proceed was taken solely on the basis ofer public sector banks. Moody’s action, which he described as “ab- “Since announcing a 10 year Jumbo solutely unprecedented” and “ridiculous”.Öffentliche Pfandbriefe transaction yes- “We had a good IoI book and wereterday, BayernLB has achieved a strong ready to go,” he said.momentum in the shadow order book BayernLB’s mortgage and public sec-process,” the issuer said in a statement. tor covered bonds are rated triple-A by“However, the issuer has decided to delay Moody’s, but the ratings were placed onmarketing the transaction following the review for possible downgrade alongside BayernLB: “Had a good IoI bookMoody’s announcement this morning. those of Pfandbriefe issued by HSH Nor- and was ready to go.” “BayernLB would like to express their dbank, WestLB, and Deutsche Kredit-thanks to those investors who have al- bank, after Moody’s placed the respectiveready shown their support. The decision issuer ratings on review for downgrade rating agency’s willingness “to go the edge”was taken in the interest of protecting the previous week. given that the rating of the public sectorBayernLB’s investor base.” A covered bond analyst described covered bonds could sustain a three notch Crédit Agricole, Credit Suisse, Deut- Moody’s action with respect to BayernLB’s issuer downgrade before being cut, accord-sche Bank and Royal Bank of Scotland public sector Pfandbriefe as a sign of the ing to the rating agency’s methodology. SOLVENCY II Covered to keep shine despite low returns Full implementation in 2013 of Sol- would occur as a result of insurers, the other corporates, “the charge is rela- vency II rules in their latest iteration largest investor group in Europe, mak- tively punitive compared with the risk could lower the appeal of covered bonds ing significant changes to their asset and returns currently available, making on the basis of their capital-adjusted portfolios to optimise their capital posi- them less attractive than other bonds on returns and thereby render them more tions, according to Fitch. a pure return-on-capital basis under the expensive to issue, according to Fitch. In a summary introducing the re- (credit) spread module” (see chart). However, the rating agency said in a port, the rating agency said that an in- With banks under pressure to in- June report that the security the asset crease in the attractiveness of covered crease funding, a reduction in demand class offers means they will remain at- bonds would be one of the main effects could increase covered bond pricing, tractive to insurers. of insurers adjusting their asset portfo- the report added. This dynamic would be one among lios to optimise capital positions. However, Fitch ended its assessment many — such as a shift from long term However, in a section dedicated to of the impact on covered bonds on a to shorter term debt, and an increase in covered bonds the rating agency said positive note, saying that the asset class the attractiveness of higher rated corpo- that although triple-A rated covered is likely to remain attractive to insurers rate debt and government bonds — that bonds have a lower capital charge than because of their “very safe nature”. Comparison of Bond Returns under Solvency II (Taking into account cost of capital) Issuer (Dated) Duration Rating Category Standalone capital charge* – Spread over Return on standard formula (%) swap (bps) equity (%) Tesco (2014) 2.5 ‘A’ 3.5% (2* , 1.4%) 50 14.0 BAA (2041) 14 ‘A’ 19.6% (14*, 1.4%) 200 10.2 Deutsche Bank covered bond (2018) 6 ‘AAA’ 3.6% (6*, 0.6%) 10 7.8 * assuming duration matching using swaps. Source: Bloomberg, Fitch July 2011 The Covered Bond Report 11
  14. 14. MONITOR: RATINGSDENMARKDanes up in arms amid Moody’s fall-outA revised approach to Danish covered overcollateralisation requirements as abonds from Moody’s resulting in nega- result of Moody’s announcement”.tive rating actions has raised tensionswith Danish issuers, leading to Realkredit Surprised and confusedDanmark terminating its collaboration Realkredit Danmark will also establish awith the rating agency and others seeking new capital centre for the financing of itsways to escape the rating pressure. ARM loans, but in contrast to Nykredit Moody’s on 10 June increased the refi- decided not to continue its collaborationnancing margins and lowered the Timely with Moody’s.Payment Indicator (TPI) from “very “The decision was taken becausehigh” to “high” for the covered bonds Moody’s, as a result of its model calcula-of five Danish issuers, citing increased tions, demanded that Realkredit Danmarkrefinancing risk due to a material rise in provide an additional excess cover ofadjustable-rate mortgage (ARM) loans, Dkr32.5bn (Eu4.36bn) if it wanted to keepand reduced systemic support and cred- its current AAA rating,” said the issuer.itworthiness. Realkredit Danmark said that it is in the Among measures taken by Danish position to provide excess cover throughmortgage banks in response to Moody’s the issuance of junior covered bonds ormove was Realkredit Danmark’s decision through a loan from its parent, Dansketo drop the rating agency. Bank, but Moody’s on 14 July placed on re- “Realkredit Danmark has discussed view for downgrade covered bonds issuedthe fundamentals of the matter with out of the issuer’s Capital Centre S becauseMoody’s in order to understand the ra- the collateral had not yet been added. Moody’s offices in New Yorktionale behind its rating model, but has Other rating agencies could gain fromconcluded that the parties disagree about the fall-out, with Realkredit Danmarkthe fundamentals,” it said on 23 June. Denmark’s mortgage financing system potentially turning from Moody’s to Moody’s went on to cut three Danish by the country’s central bank, which has Fitch — Standard & Poor’s already ratesmortgage credit institutions’ issuer rat- highlighted a reduction in refinancing its covered bonds AAA.ings on 1 July and lowered covered bonds risk linked to ARM loans and a reduc- BRFkredit is in talks with S&P aboutissued out of BRFkredit Capital Centre E tion in risks surrounding continuous rating its capital centres after saying thatfrom Aa1 to Aa2. loan-to-value requirements as ways in it was “surprised and unable to under- However, with the Danish commu- which financial stability needs to be stand” Moody’s actions. The move wasnity increasingly vocal in its criticism strengthened. announced on 6 July as one of a pack-of the rating agency, Moody’s put out a age of measures from BRFkredit, whichspecial comment on the Danish covered “The parties disagree Moody’s cut to Baa3 on 1 system in which its strengths werehighlighted. about the The bank said that it will keep Moody’s as a “co-operation partner” and establish “Despite weakening issuer credit fundamentals” a new capital centre (H) that will prima-strength and our assessment of increased rily refinance ARM loans, in line withrefinancing risk, the position of Den- These recommendations and Moody’s Nykredit Realkredit’s and Realkreditmark as having one of the strongest cov- changes were among “future business Danmark’s plans.ered bond frameworks in Europe has not conditions” cited by Nykredit Realkredit The issuer had made a commitmentchanged,” said Moody’s, adding that the in an announcement from 21 June setting in the documentation of covered bondsnew refinancing margins are the lowest out a five point operational plan. This in- issued out of capital centre E to maintainin Europe and that the TPIs are among cludes funding ARM loans with bonds is- a Aa1 rating by injecting capital if nec-the highest in Europe. sued out of a special capital centre so that essary, but BRFkredit said that Moody’s Moody’s methodological revisions these “may be given an independent, and methodology made achieving such a rat-coincide with increased scrutiny of possibly lower, rating leading to lower ing impossible.12 The Covered Bond Report July 2011
  15. 15. MONITOR: RATINGS “You look at the debt-to-GDP ratio in Canada, it’s very impressive indeed” page 39FITCHEncumbrance a concern, but checks existIncreased issuance of covered bonds and most assets on the company’s balance Fitch nevertheless noted the benefitsrenewed repo activity raise asset encum- sheet, reducing overall financial flexibility. covered bonds can carry for issuers frombrance issues, according to Fitch, but the “In addition, a high concentration of a ratings perspective.rating agency sees the trend easing, even secured financing increases the risk that “Most global trading banks did notif bank funding costs remain elevated. unsecured creditors could be adversely af- have a covered bond programme prior Regulatory reforms, increased risk aver- fected as secured creditors may have prior- to the crisis, but many have establishedsion and other measures pushing the asset ity claims to higher-quality assets,” it said. such programmes in the past two years,”class to the fore have led to greater use of “If the industry shifts to a significantly it said. “As such, the use of covered bondscovered bonds, said the rating agency in a higher level of secured funding versus his- by these banks remains limited, but rep-report in June, adding that the increased torical levels, Issuer Default Ratings (IDRs) resents a funding source offering poten-take-up of the asset class will hit a peak. could come under pressure and unsecured tial diversification and maturity exten- “Fitch believes that the limited supply debt ratings could fall below the IDR due to sion benefits. This potential has yet to beof high quality cover pool assets and na- lower recovery expectations.” fully tapped by these banks.”tional regulatory limits, if properly mon-itored and enforced, serve as checks to New Issuance in Debt Markets (Euro Zone) Excludes issues <USD50mthe use of covered bonds, allaying some (USDbn) Covered bonds (not retained) Covered bonds (retained) Senior unsecured debt 700investor concerns over high issuance vol- 600 500umes in recent months,” it said. 400 300 The rating agency said that a high de- 200 100pendence on secured funding could con- 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010strain ratings and that an over-reliance Source: Dealogic, Fitchon this type of financing could encumber COUNTERPARTY CRITERIA S&P hears warnings about proposals’ effect Standard & Poor’s proposals for assess- currently proposed, would have a dis- ing counterparty risk in covered bonds proportionate effect on covered bond would have a disproportionate effect ratings compared with asset-liability on ratings compared with asset-liability mismatch risk, as assessed using the mismatch (ALMM) risk, issuers and in- ‘2009 ALMM criteria’,” said S&P . vestors have told the rating agency. DZ Bank analyst Jörg Homey drew at- They consider counterparty risk to tention to S&P disclosing that many issuers be mainly an issuer risk, with investors would consider the move to cap covered pleased at the prospect of increased trans- bond ratings by reference to the rating parency about derivative counterparty risks agency’s new counterparty criteria as — in programmes, said S&P in an interim re- in Homey’s words — an “over-reaction”. port published on 7 June. S&P said it will respond to feedback However, the rating agency said that “by changing the criteria if we deem it Jörg Homey: Rating cap the majority of investors and issuers ap- necessary, by explaining the original pro- seen as “over-reaction” peared to view counterparty risk as sec- posals more clearly to remove ambiguity, ondary to an issuer’s ability to pay its or by leaving the proposals unchanged”. is probably going to be whether S&P covered bond obligations. Homey said that programmes where is satisfied by the precautions taken to “Most investors and issuers consid- the issuer acts as a counterparty will be replace the bank as counterparty for ered that counterparty risk, if assessed hit particularly hard. its own cover assets in the event of a using the 2011 request for comment as “The decisive question in this case downgrade,” he said. July 2011 The Covered Bond Report 13
  16. 16. MONITOR: RATINGSMOODY’STimelier quarterly report presages latest trendsMoody’s made good on a commitment Average cover pool losses by country: mortgage backed covered bondsto deliver more timely covered bond Collateral risk Market riskdata by skipping Q4 2010 and moving 35% 29% 27% 30%straight from Q3 2010 to Q1 2011 with 25% 21%its latest quarterly monitoring report, 20% 16% 15% 16% 15%released on 11 July. 15% 12% 11% 9% 11% 9% 10% 8% 10% 7% The rating agency said that it has been 3% 4% 5% 3% 4% 5% 5% 5% 4% 5%focusing on producing more up to date 0%information since its last overview, which ul m y d ce nd y s l n en m ly ga nd an wa ai an -b do do Ita t) an ed la Sp rtu le rla m nl or on ng Irewas released in April. ng Fr Sw er Fi Po N he (n Ki Ki G et d d “The delay between the publication N te te ni ni U Udate of this report and the date the in-formation relates to [up to 31 March] has Average cover pool losses by country: public sector backed covered bondshalved since the last monitoring report Collateral risk Market risk 30%was published,” said Moody’s. “Going 24% 25%forward, Moody’s aims to produce this 20% 19% 18%report within three months of the datethe information relates to. 15% 11% 9% “The production of timely data has 10% 7% 7% 7%also extended to the production of 5% 3% 3% 3% 3%the performance overviews, which are 0%published for every covered bond pro- Austria France Ireland Italy Germany Spain Source: Moody’sgramme included in this report. Moody’saims to publish all performance over- notches in between the ends of Q3 2010 prescriptive order, but those are the threeviews within six weeks from the date the and Q1 2011. tiers that they look to do analysis on, andrequired information is received from their focus depends on the situation.the covered bond issuer.” Three tiers for investors “For example, if an investor has ex- Since the end of the last quarter The rating agency also launched a re- posure to a covered bond programme inMoody’s has revised its assumptions search service in June packaging its Canada, the focus of their credit monitor-with regard to Danish covered bonds covered bond research with analyses of ing right now may just be on the issuingand taken action in relation to several sponsor banks and related sovereigns. bank, versus Spain where their currentprogrammes from the country. Data on focus may be on the sovereign, the bank,Danish covered bond programmes in the “They represent and the cover pool detail.”overview was therefore incomplete, with Kearns said that the launch of the serv-the rating agency referring to recent re- credit investors ice also reflects developments in the cov-leases. (See separate article for coverage much more than ered bond market and its investor base.of Moody’s Danish actions.) “There’s an overwhelming sense that Among the largest changes in aggre- rates investors” US investors are interested in the space,gate country data given by Moody’s were but they represent credit investors muchfigures relating to Portuguese covered “We’ve tried to complement the cov- more than rates investors, like the tradi-bond programmes, even though the data ered bond research by adding in sovereign tional buyer-base,” she said. “This is allrelates to a period before the rating agen- research as well as the issuing banks’ re- the way from your typical high gradecy cut Portugal to junk on 5 July. search,” said Arlene Kearns, senior product credit investor to your hedge funds that The biggest fall in average surplus strategies in Moody’s structured finance are looking at more high risk exposure.overcollateralisation for a country was group. “The feedback that we’ve gotten “Their expectations are definitely differ-in Portugal, where the figure fell from from the marketplace is that they look at ent from the traditional rates investor. They18% to 5%. All Portuguese covered bond the sovereign first, the issuer next, and the are looking for cover pool information andprogrammes were cut by two or three programme third — not necessarily in that detail and looking to do that deep dive.”14 The Covered Bond Report July 2011
  17. 17. MONITOR: MARKETMarketICMAAnti-whispering campaign ‘counterproductive’Syndicate bankers are awaiting the details mately priced at 18bp over on the back of starting to draw conclusions and moveof prospective ICMA best practice guide- a Eu750m order book. ahead with new practices,” he said.lines to see if primary market practices “We hit it spot-on, but the proce- One practice being scrutinised is thatwill have to change in ways that could in- dure could have been smoother,” he said. of price whispers, which Ewing character-crease execution risk for covered bonds, “These kinds of guidelines are harming ised as an interim step after pre-soundingresulting in issuers having to pay higher the proper evaluation process, but we had but before bookbuilding has begun on thenew issue premiums. to deal with that.” basis of official guidance. He said that the The International Capital Market Asso- practice of price whispers had emerged inciation (ICMA) is working toward a set of Go the extra mile response to the financial and sovereignbest practice guidelines aimed at increas- Ruari Ewing, director, primary markets, debt transparency in new issues, through market practice and regulatory policy at “In an easy market you can go straightchanges to the way in which information the International Capital Market Associa- to guidance, but in volatile markets you’reis communicated at various stages of the tion (ICMA), told The Covered Bond Re- dealing with a completely different kettlenew issue process. Any such guidelines port that the association had in October of fish,” he said.could affect the practice of price whisper- 2010 added an explanatory memorandum Although price whispers can be shareding, with the release of updates on order on pre-sounding, bookbuilding and allo- with many market participants, some arebook sizes also under scrutiny. cations to its handbook, and that several arguing that the information needs to be Banks’ efforts to get in line with the roundtables with investors had been con- communicated to a larger audience, ac-impending guidelines have already had an ducted over the past couple of years, most cording to Ewing.impact on the primary market. recently in May. “The aim is to go out much wider with When Landesbank Baden-Württem- “Banks are now continuing their dis- a whisper than before,” he said. “With in-berg sold a debut benchmark mortgage cussions internally, with some already creasing volatility there is a feeling that it isPfandbrief on 4 July, a Eu500m six year important to go the extra mile. Under thedeal, leads Natixis, LBBW, Royal Bank old system you could always miss a hand-of Scotland and UniCredit launched the ful of accounts, and this new approach isdeal without having gone out with a price trying to wrap up that residual end.”whisper, despite market conditions being In practice this means that banks arefragile, if stable. looking at ways to modify their commu- Jörg Huber, head of funding and investor nication to better reach transactions’ tar-relations, treasury at LBBW, said that initial get audiences, said Ewing, which couldfeedback was positive, but non-committal in involve sending information as they havethe absence of a pricing indication. been doing but also potentially dissemi- “Unfortunately there was recently an nating it by way of news-feeds, amongICMA announcement recommending not other use price whispers,” he told The Cov- The Covered Bond Report under-ered Bond Report, “which makes it quite stands that ICMA has been seeking todifficult to find the right clearing level. release a formal publication that would “This meant that we couldn’t inform most likely be in the form of an additionthe sales teams what our initial pricing to the association’s primary market hand-ideas were to get relevant feedback, so book. However, it is not clear how detailedit took a bit longer to establish what the or prescriptive this might be.right level was.” This was deemed to be represented Broadbrush adoptionby the 18bp-19bp over mid-swaps range, Although final guidelines have not beenwith the leads taking indications of inter- Jörg Huber: “These kinds of drawn up, syndicate officials said thatest at that level and order books growing guidelines are harming the proper market participants have already been im- evaluation process.”quickly once they were officially opened, plementing what one banker described asaccording to Huber. The deal was ulti- “broadbrush” changes to new issue prac- July 2011 The Covered Bond Report 15
  18. 18. MONITOR: MARKETtices in line with where discussions have to the practice of building shadow orderbeen heading. books based on price whispers. Syndicate bankers described ICMA’s A leading covered bond investor toldposition as aiming to ensure that everyone The Covered Bond Report that his posi-who could be involved in a transaction has tion remained unchanged today and thataccess to public information, with inves- he is still dissatisfied with what he calledtors pushing to do away with whispers and pre-sounding. It was unfair for only aother practices that could involve them handful of investors to be given prelimi-being made privy to inside information nary pricing thoughts, while others onlyand/or wall-crossed. ICMA explains wall- belatedly received this information andcrossing as being sounded for a potential had little time to place orders given shorttransaction on the basis of information bookbuilding periods, he said.that may amount to inside information While issuers are eager to avoid execu-and that could make investors subject to tion risk, the portfolio manager said thatlegal restrictions, such as restrictions on he did not consider there to be any stigmatrading in related securities. attached to not completing a deal or hav- A syndicate official said that one out- ing to widen pricing, and that this could income of discussions taking place could be any case also happen if a new issue projectthat the term “whisper” is no longer used, had been pre-sounded.partly on account of its connotations of He urged a return to traditional dealsecrecy. execution methods, citing high issuance Terminology is not likely to be the volumes this year and the lack of failedonly feature of primary market activity transactionsset to change, however, with a syndicate “The crisis mode for covered bonds Ruari Ewing: “The aim is to go outbanker saying that the ideas under dis- doesn’t make sense,” he said. much wider with a whisper.”cussion will also change the dynamics ofpre-sounding. Less fear of failure? “Pre-sounding will be on a more public Making it more difficult to arrive at the ap- could in future be less stigmatised forbasis,” he said. “The process will be slightly propriate initial guidance for a transaction doing so. One syndicate banker said thatdifferent, designed to make it more trans- by prohibiting discreet discussions with a market participants’ judgements of pulledparent.” small number of key investors would in- deals had already eased over the past three crease execution risk or the risk of an issu- years, and that such occurrences were less “The crisis mode er finding itself in a position where it has conversational. for covered bonds to pull a deal. This could result in issuers having to pay higher new issue premiums He identified the return of retention deals as a possible outcome of any newdoesn’t make sense.” to reduce such risks. guidelines on the communication of up- But some bankers questioned whether, dates on order book sizes — something Another syndicate official said that IC- or the degree to which, any new measures that bankers said is also being debated. TheMA’s guidelines had left him unimpressed would affect new issues, saying that price Covered Bond Report understands thatbecause of the increased execution risk whispers already spread quickly and wide- lead manager and trading orders being in-they would involve for borrowers. Inves- ly, perhaps reaching more market partici- cluded in order books that may otherwisetors, on the other hand, deemed infor- pants and journalists than was intended. not be fully covered is a focus of scrutiny.mation such as price whispers and order “To all intents and purposes, how The syndicate official said that a po-book updates to be relevant. many deals have been out where you tential clampdown on including lead The guidelines were “slightly confusing haven’t heard a price whisper?” asked one manager orders in order book sizes and/and counterproductive”, said the syndicate syndicate official. “A cynic would argue or potentially requiring such orders to beofficial. that if it is not in writing then it is easier to identified separately could lead to the re- The debate in part echoes that that took more elegantly step back or adjust levels, turn of retention deals because such rulesplace in the covered bond market last year but I’m not 100% convinced by that. would make it more difficult for banks towhen the Covered Bond Investor Council “When it’s announced, it’s announced.” give the impressions that deals are being(CBIC) in January 2010 called for an end Others said that those pulling deals successfully handled in pot format.16 The Covered Bond Report July 2011
  19. 19. MONITOR: MARKET “The legislation is being perceived positively by investors” page 40SUPPLYWildcards undermine H2 forecastsMoving into the second half of the year a sustainable solution for Greece, who (the UK, Norway, and Denmark), weafter an increasingly fraught first six knows what will happen? have seen active US dollar issuance.months, covered bond analysts were con- “But if they do, we might even see “This is something that will poten-sidering the prospect that covered bond more issuance than we have forecast, tially drag euro issuers toward the dollarissuance might not meet the projections driven by the peripheral countries.” market.”they made at the turn of the year. Covered bond analysts say that sup- New Zealand and Australia are con- “Everything is stuck on the topic of ply in different currencies could affect sidered minor players, with market par-the euro-zone,” says Bernd Volk, head of what should be expected from each ju- ticipants undecided as to whether Aus-covered bond research at Deutsche Bank. risdiction. tralian issuers will even come to market“The covered bond market will continue “The UK is a little bit behind what we this year.on a slower pace even though a resolu- had expected,” says Riemann-Andersen, “For Australia, we have a cautioustion is found for Greece, also due to pre- “but we stick to the forecast as most UK estimate of Eu2bn, but there also mightfunding and the declining funding needs banks have large refinancing needs. be nothing if the upcoming law gets de-of numerous issuers.” “The joker that could take euro sup- layed” says Danske’s Riemann-Andersen. ply lower than projected is of course di- Other jurisdictions have meanwhile Diversification into versification into US dollars or British surprised to the upside. dollars or pounds pounds.” UK banks issued some Eu10bn in “Italy has done pretty well as they benefitted from the relief in the sovereign “the joker” the first of the year in euros, according market earlier this year,” adds Riemann- to Danske, when the bank had forecast Andersen. Deutsche Bank had estimated Eu22bn for the year. Italian banks sold some Eu14bn ofEu250bn in euro benchmark issuance for Florian Hillenbrand, senior credit benchmark euro covered bonds, com-the year, a number Volk now considers analyst at UniCredit, attributed the UK pared with Eu20bn forecast by Danske.impossible. shortfall to a greater trend towards US UniCredit’s Hillenbrand foresees “Due to all this rating action and dollars. heavy issuance in concern I think the market will “There is one respect that weighs “Last year we had Eu27bn in in Sep-be happy if we do another Eu60bn and heavy on euro issuance,” he says. “That’s tember,” he says. “I would be quite sur-hit Eu200bn, but I think everyone will the US. What we see right now is in prised to see anything less than thisprobably struggle with market issuance,” countries where they have to swap their number after we saw record issuance inhe says. issuance back into their home currency September through March.” “France will be crucial in reachingEu200bn,” he adds, “which is the best we UniCredit H2 supply forecastscan hope for. If they issue a lot, we’ll have 60a lot more volume.” 2010 2011 ytd 2011e French issuers sold some Eu37bn of 50benchmarks, including taps, in the firsthalf of the year. 40 Danske Bank had forecast Eu226bn 30in gross supply for 2011, and some 62%of that volume was issued in the first 20six months of 2011. By comparison, 10Eu185bn hit the market in 2010, accord-ing to the Danish bank. 0 “There’s still a lot of uncertainty be- g n s Po en Fi a ce y N da et Italy xe and De ay d Ze d d G rk Ca al UK Sw US nd itz e an ai ur i an ew rlan an str Sw ec an ed a g w nacause market access is very much linked Sp bo rla m nm rtu l or Au nl al re Ire Fr er e m he Gto the sovereign debt crisis,” says Chris- Lu N N e Thtian Riemann-Andersen, senior analyst Source: UniCredit Researchat Danske. “If they don’t come up with July 2011 The Covered Bond Report 17