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The fifteenth annual Euromoney/ECBC Covered Bonds Congress took place in Barcelona on 14th September 2017.
One of the themes dominating the Euromoney/ECBC Covered Bond Congress in Barcelona this year was the impending introduction of a Covered Bond Directive. So it was fitting that we heard from keynote speakers Bernd Lucke, the MEP responsible for covered bonds in the European Parliament and Didier Millerot, the head of the unit at the European Commission tasked with drafting the Directive. Both speakers provided valuable reflections on the process, its motivations and the areas of possible controversy.
Some of the controversial points were discussed in detail in a series of interactive roundtables through the day. Many of these were familiar topics – such as the debate on extendible maturity covered bonds – others were newer, for example the proposed minimum over-collateralisation for all European covered bonds. In the final session of the day, the audience heard summaries of these discussions and the reflections of senior market participants on them. The audience were able to indicate both their overall level of concerns and hopes about the new Directive and which of the more technical details they wanted to hear more about, via the interactive polling on our new conference app.
In addition to discussing the Directive, many keynote speakers and panellists mentioned one of the next major developments in the covered bond market - the application of covered bond technology outside its traditional sphere. Two major developments are the use of the funding technique to help the recovery of the European economy – can covered bonds fund loans to infrastructure or small and medium sized enterprises? As well as how covered bonds might help broader societal objectives – the funding of energy efficiency loans. Both of which topics were discussed in panels and keynote speeches throughout the day.
Another major theme of the conference this year was the market’s development into new jurisdictions. With the ECB suppressing yields and bond availability in the more traditional markets, there was strong investor interest in new sources of supply from central and eastern Europe, Asia, Canada and Brazil. Several panels contained issuers and prospective issuers from these countries discussing the prospects for new bond issuance and the process of putting a market in place in emerging jurisdictions. The fact that delegates to the conference came from 38 countries this year – a record – illustrates the growing globalisation of the market.
In any discussion on covered bond yields, the elephant in the room currently is the ECB’s covered bond purchase programme. Many panels and keynote speakers speculated on when this would start to taper and what the implications were. Just as importantly panels and sponsor workshops discussed the optimal strategy for issuers and investors to prepare for this event.
A final recurring theme was the possibility of credit risks in covered bonds. The recent failure of a major issuer, high house prices in many jurisdictions and the implications of the resolution directive were all discussed at length in one panel.
Euromoney Conferences would like to thank our co-host, the ECBC, all our sponsors, speakers and delegates for supporting the conference again this year. We already look forward to reconvening next year on Thursday 13 September 2018 in Munich, Germany.