Sidley Austin Update on U.S. Covered Bond Act of 2010

Michael Durrer, lead partner on Sidley Austin LLP's covered bond team, is a member of the influential U.S. Covered Bond Council.  The law firm justifiably describes itself as a "pioneer" in the covered bond field, having "acted for the issuers in establishing the first two covered bond programs in the U.S.," as well as "representing the arrangers on the first U.K. structured covered bond program."

Beyond ably summarizing the provisions of the United States Covered Bond Act, introduced in Congress March 18 by Scott Garrett (R-NJ), Sidley Austin's six-page "Covered Bond Update" provides more background and context than most other such summaries.  For example, it notes differences between the Act and a previously-proposed covered bond amendment to financial reform legislation, as well as a prior covered bond bill.

The summary concludes:

"Overall . . . the Act is a meaningful step forward in the development of a U.S. covered bond market.  Potential issuers and investors will disagree on a number of specifics, for example who is an 'eligible issuer,' what is an 'eligible asset' or whether federally-sponsored liquidity should be provided to covered bond programs.  No doubt the text of the Act will be further amended as it makes its way through the legislative process.  Should the legislation be passed, supplemental regulations will be needed from the Regulator to flesh out specifics.  Nonetheless, the Act sets out most of the fundamentals that are needed to create U.S. covered bonds more efficiently and on terms acceptable to global investors."

To download a PDF of 'The Proposed United States Covered Bond Act of 2010: Covered Bond Update," click on "20100326 Sidley" under "Attachment," below.