Covered bonds should count as Level 1 assets under CRD IV, the ECBC argued in a position paper released on Monday, with this treatment particularly important for domestic covered bonds in Denmark as it would otherwise be “simply impossible” for the country’s financial institutions to fulfil LCR requirements.
Timo Ruotsalainen, Aktia Real Estate Mortgage Bank managing director, said that a Moody’s downgrade of the issuer’s covered bonds from Aa1 to Aa3 last Friday, which was less harsh than had been expected, was a pleasant surprise and that any decision on a potential liability management exercise was now less pressing.
A joint council of Sweden’s Riksbank and Finansinspektionen has called for issuers to take the lead in releasing information relating to asset encumbrance after noting the potential risks of high levels of encumbrance, although they also highlighted the relative stability of covered bond funding.
The possibility of Aktia Bank launching a liability management exercise offering investors the option to switch into its covered bonds once it begins issuing directly next year has been raised by Aktia Real Estate Mortgage Bank, while some market participants have said that the Finnish group’s erstwhile partners could issue on their own.
Ringkjøbing Landbobank has entered into a joint funding arrangement with BRFkredit whereby the mortgage bank will finance the regional bank’s real estate loans through SDOs.
Svenska Handelsbanken subsidiary Stadshypotek priced the longest dated Yankee covered bond since the financial crisis on Tuesday, a $1.5bn seven year deal that came only two business days after the issuer made its Kangaroo debut, while Swedbank made a $1bn senior dollar debut.
Sweden’s Stadshypotek is reopening the Kangaroo market for covered bonds with a dual tranche five year deal that is only the second to be sold into Australia by a European issuer since the crisis.
Danske subsidiary Sampo Bank is pricing its first benchmark covered bond of the year today (Thursday), a Eu1bn no-grow seven year issue that offered a premium over top tier Finnish names but came tight to the issuer’s curve, said a lead syndicate official, after some others saw a wider new issue premium.
Aktia Bank will take over from Aktia Real Estate Mortgage Bank as the Finnish group’s covered bond issuer, a move fuelled by regulatory and rating criteria changes that favour more “streamlined” universal bank issuance, the specialist issuer announced last Wednesday (12 September).
Norway’s Storebrand Boligkreditt took advantage of healthy domestic demand and tighter levels to increase a June 2017 Norwegian krone floating rate covered bond by Nkr400m yesterday (Wednesday), taking the new issue size to Nkr2.65bn (Eu356m).