Global Covered Bond News Roundup - Week Ending August 13

Frankly, news was light in the covered bond world during the second week of August, at summer's height.

Most items of covered bond news compiled below have not received longer treatment as individual articles in this publication, often because they relate to geographic areas outside our focus, North America.  But we also include links to some articles that we have published separately during the past week  — all organized by country.

Note: For links to most rating agency sites, you will need to log in (free) at the site before clicking the link (sometimes available without paid subscription only for a limited period of time).  For links to Factiva and some online publications, you may need to have a subscription.

AUSTRALIA

• Speaking on the need for reduced funding costs, Commonwealth Bank of Australia CFO David Craig said (Aug. 10): ""We are talking to regulators, Treasury and others about a range of things, and in particular covered bonds would be a logical partial solution to funding issues."

• Unfortunately, we can't provide a link, but Insto magazine (July issue) ran a story on prospects for covered bonds in Australia titled "The Other Side of the Ditch Is Covered." Among other things, it quotes lawyer Mick Young as saying: "The Banking Act requires that if a financial institution is unable to meet its payment obligations, its Australian assets are to be used to meet its deposit liabilities in priority to all other liabilities.  That's why the APRA [Australian Prudential Regulation Authority] has expressed a policy concern that ring-fencing assets for covered bond pools might potentially leave the issuing financial institution's remaining asset base insufficient to meet liabilities to depositors."

GERMANY

Moody's (Aug. 13) announced that the program update for the €10 billion Medium Term Covered Note Program of Terra Boligkreditt, in and of themselves, do not result in a reduction or withdrawal of the current Aa2 rating of the mortgage covered bonds issued by Terra Boligkreditt.

NEW ZEALAND

The Reserve Bank of New Zealand has listed its "Application criteria for acceptance of Covered Bonds in Reserve Bank Domestic Markets' operations."

UNITED KINGDOM

In a blog post on how (in his view) the Financial Services Authority (FSA) poses a threat to the UK's economic recovery, Ray Boulger wrote (Aug. 12): "Although there have been a few RMBS issues over the last year the market appetite for these bonds is very limited. A good start might be to encourage the covered bond market, although this route would only be open to a small number of top rated lenders."

UNITED STATES

• Regarding BA Covered Bond Issuer (sponsored by Bank of America), Moody's Investors (Aug. 11) stated that (a) the proposed transfer of swap agreements from The Royal Bank of Scotland, N.V. (formerly known as ABN AMRO Bank N.V.) to The Royal Bank of Scotland, PLC, expected to occur on August 11, 2010, and (b) the execution of a supplemental indenture evidencing the transfer, would not, in and of itself, and as of this time, result in the reduction or withdrawal of the ratings on the Moody's-rated securities related to BA Covered Bond Issuer Series 2007-2 and Series 2007-3.

• The Tough Times for Lenders blog posted an explanation (Aug. 12) of why "covered bonds make sense as another capital source for commercial real estate."

Information from rating agencies in the entries above is typically adapted from those agencies' media releases.  Rating news items should not be relied upon as a substitute for the full text of rating action announcements.