Having announced the third covered bond purchase programme (CBPP3) at its last press conference, at the beginning of September, the European Central Bank last Thursday (2 October) followed up with the technical details of CBPP3 — which didn’t disappoint our expectations as the eligibility criteria are very wide.
The completion of the Liquidity Coverage Ratio (LCR) rules among various countries is proceeding, with the US releasing its final policy. On the euro front, another document was leaked, with most parameters remaining the same.
The ECB buys covered bonds — again. It’s like changing your password on your computer. You leave the letters identical and increase the number at the end by one to keep it simple — in this case, to 3.
Regulators in several countries have embarked upon attempts to calm down mortgage and housing markets. Besides limiting maximum LTVs, Sweden and Norway have been increasing risk-weight floors for mortgage assets in recent months.
On Tuesday of last week (10 June) the European Banking Authority (EBA) held a public hearing on covered bonds where it presented plans for risk weight recommendations to the European Commission as well as covered bond best practice recommendations to the European Systemic Risk Board (ESRB) in front of roughly 50 participants from around Europe.
Crédit Agricole covered bond analysts weigh the covered bond implications of extraordinary measures announced by the European Central Bank for covered bonds. The market will remain a seller’s market, but the impact on issuance volumes will not be as dramatic as some might expect, they say.
The delegated Act on the LCR, or rather a DG Market Staff Paper on the matter was leaked this week. It is important to stress that this is not yet the final version.
To limit the risk of a bank default leading to major problems at other institutions, regulators limit the overall money that a bank can lend to another institution. Regulators look at the overall existing exposure, including, for example, bond investments or direct lending.
Following the first issuance of a euro covered bond to incorporate fixed and floating rate tranches by UniCredit in January Crédit Agricole CIB analysts explore investor opinions of floating rate notes.
The impact of the Norwegian housing market on covered bonds has been an ongoing topic for quite some time now. After strong growth of over 300% in the last 20 years, we’ve started to see the beginning of a correction in Norwegian house prices more recently.