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The inaugural Euromoney/ECBC North America Covered Bond Forum took place on Thursday 19 April in Vancouver.
The event set out to discuss the US$ covered bond market and the prospect for a resurgence in US$ issuance. So it was fitting that we heard first from keynote speaker, Sandra Thompson, Deputy Director of the Federal Housing Finance Agency who gave us an update on US housing finance. Sandra’s presentation discussed the evolution of US housing finance and was followed by an interview with Jerry Marlatt, Partner from Mayer Brown. Sandra and Jerry discussed the potential re-emergence of covered bonds in the US which Sandra deems unlikely until the future of Fannie Mae and Freddie Mac are resolved.
The morning continued on this theme with the first panel discussing US$ covered bonds. Panellists delved into the topic of covered bonds in the US market and GSE reform. Voting on our conference app, 63% of the audience indicated that they believe that the US government is not serious about GSE reform. After a brief break, the discussion continued with a second panel looking at Canadian covered bonds exploring whether the market, so far dominated by the big 7 Canadian banks, will expand with smaller banks or credit unions setting up programmes, the impediments to that to date and how to develop a domestic investor base for the product.
Throughout the day, three roundtable discussions took place concurrently to the main sessions. These highly interactive roundtables allowed delegates to participate with the discussion on topics including covered bonds vs securitisation, extendable maturities and transparency and disclosure.
The sessions continued into the afternoon with a panel focusing on the implications of Basle recognition which then lead to a special debate discussing the Rule 144a and Reg S. Wojtek Niebrzydowski, Vice President, Global Term Funding from CIBC and Rafael Scholz, Head of Treasury from Münchener Hypothekenbank eG debated the relative merits of the two formats. After this debate, it was interesting to hear a case study from Per Sagbakken discussing DNB Boligkreditt’s experience in issuing USD covered bonds in 144a format.
A special interview discussing what hope there is for US covered bonds helped bring the day to a close. Jerry Marlatt continued the discussion from the morning summarising that there’s not much hope for any US Covered Bond market development in the short-medium term. The day ended on a high with an investor panel looking at the global opportunities for covered bond investors.
Euromoney would like to thank all our sponsors, speakers and delegates, without whom the event would not be possible. We would also like to thank our co-host the ECBC, and our partners at CMHC and EBRD. We look forward to seeing you at the next Euromoney/ECBC North America Covered Bond Forum in spring 2019.
ECBC Plenary Meeting
The 27th ECBC Plenary meeting will take place in Vancouver, Canada on 18 April 2018, the day before the Euromoney/ECBC North America Covered Bond Forum also in Vancouver.
The ECBC Plenary meetings are key covered bond bi-annual networking events. They gather more than 300 participants including key decision makers from the covered bond industry, issuers, investors, government & regulatory officials at both national and EU level, rating agencies, journalists, etc. from over 35 covered bond jurisdictions.
Please visit the ECBC’s webpage for the latest details - https://hypo.org/ecbc/event/ecbc-plenary-meeting-vancouver-canada/
Please note that this event is only open to ECBC members and guests invited by the EMF-ECBC Secretariat.
Covered Bonds 101
Unsure what a covered bond is? Not to worry because over the next 5 weeks Richard Kemmish, Editorial Consultant at Euromoney Conferences will delve into the nitty gritty details of the covered bond market over 10 serialised blog posts. Read the latest post now:
Part 1: What isn't a covered bond? "It’s ok. You’ve got an excuse for not knowing much about a $3.2 trillion housing finance market – its all European issuers selling euro denominated bonds to European investors, right? Half right..." Read more here.
Part 2: Rates or Credit? "Covered bonds are issued by private sector banks without any kind of government guarantee. So why do most investment banks deal them off their rates desks? Here are four good reasons..." Read more here.
Part 3: What Law? "The problem with Europe….ok, one of the problems, there are many…is that we have laws at two different levels. There are the national laws in each member state of the European Union (it's politically incorrect to call them countries now..." Read more here.
Part 4: Let's talk about assets. "When we talk about covered bonds we usually talk about residential mortgages. It’s the only asset in the pool in most countries – 19 countries in Europe don’t use any other assets. There are plenty of good reasons for that but…" Read more here.
Part 5: What about the other assets? "OK, so I might have slightly simplified it when I said that covered bonds only funded mortgages and public sector receivables. So here is the run down on everything else…" Read more here.
Part 6: Future assets. "Just when you thought I’d forgotten my promise a couple of posts ago to talk about it, a few thoughts on why it matters that some people think covered bond assets are defined by one set of characteristics and some people…" Read more here.
Part 7: Lawyer's bills. "My favourite line in the whole of Shakespeare? It has to be from the not so well known Henry the Sixth part 2 when a mob is destroying London in protest at the out of touch rulers (modern populism has long antecedents). One of the rioters shouts “Let’s kill all the lawyers... " Read more here.
Part 8: Special public supervision. "Shall we take a step back? In very general terms, why are banks supervised? To protect creditors? To protect deposit insurance schemes – the FDIC (yours) or the EDIS (ours)? To ensure financial stability? To protect wider economic growth?" Read more here.
Part 9: Bullet bonds/amortising assets. "A few posts ago I touched on the topic of so called ‘soft bullet’ covered bonds. The fact that covered bonds are bullet maturities with no call optionality is so key to their value proposition that I probably need to go into this in a bit more detail..." Read more here.
Part 10: Why are covered bonds going global? "I’m asked a lot of questions about covered bonds – its what I do for a living. But the biggest outlier of all is, why is the European Covered Bond Council meeting in Vancouver?" Read more here.