DBRS: "Room to Grow in the Canadian Covered Bond Market"

When it comes to developing covered bonds as a funding tool, Canada is way ahead of the U.S., with a couple of multibillion dollar issuances aimed at American institutional investors already this year.  This one-pager from Canadian rating agency DBRS provides statistics to show how much Canada's Big Five banks have issued in total — and how much further their covered bond programs could go.

The legal ceiling comes from the country's financial regulator, which has limited issuance of covered bonds to 4% of a bank's total assets.   All of the Big Five — Royal Bank of Canada (RBC), Canadian Imperial Bank of Commerce (CIBC), Bank of Montreal (BMO), Toronto-Dominion (TD) and Bank of Nova Scotia (BNS) — have established covered bond programs, although only three have issued any covered bonds to date. 

According to DBRS, RBC's covered bond program currently has about C$7.8 billion (US $7.67) in covered bonds outstanding, while CIBC has about C$6.4 billion and BMO has about C$1.5 billion.  (Although we are rounding off here, DBRS states the exact figures.)

In a very useful chart, the DBRS document (published April 30) calculates the maximum permitted issuance amount from each bank's "implied total assets" (as of Oct. 31, 2009), then subtracts covered bonds outstanding (if any) to arrive at "potential remaining issuance."

Adding up the figures for each bank produces a total potential remaining issuance of C$71.6 billion for Canada's Big Five banks as a group.

The document also includes other information about Canadian covered bonds, including a couple of paragraphs on issuance history.

Of course, any figures in a document such as this are accurate only as of the date of publication.

To download a PDF of "Room to Grow in the Canadian Covered Bond Market," click on "DBRS 20100430" under "Attachment," below.