20 April 2018 The Covered Bond Investor Council (CBIC) has issued a position paper on the recently released European Commission’s legislative proposal on covered bonds. The CBIC welcomes the legislative initiative on covered bonds. Investors appreciate the blueprint this law will provide to countries that do not yet have a covered bond law. Furthermore, the CBIC appreciates that the Commission has adopted a principles based approach that should allow existing national frameworks to continue to operate as before. This flexibility is welcome, however in some places it goes too far and risks lowering the high standards investors have come to expect in covered bonds. Our position paper develops on some of the areas, such as eligible assets or extendable maturities, where investors would like to see more clarity and stricter criteria to ensure investor protection is upheld. The CBIC will engage with policy makers in the coming months on this proposal to ensure that the investor voice is heard in the legislative process.
CBIC responds to Review of the Covered Bond Label Harmonised Transparency Template - 2016
23 May 2016 In the absence thus far of enhanced rules on mandatory pool disclosure on a Europe wide basis from the European Commission, industry led initiatives are essential to the continued good operation and standing of the covered bond market. The ICMA AMIC Covered Bond Investor Council welcomes the fact that the Harmonised Transparency Template (HTT) is to be reviewed and enhanced on a regular basis and are taking the opportunity of this review to comment on its effective implementation to date and to provide comments from members on possible features to consider as part of the review process.
The CBIC response is based on the information available on the Covered Bond Label website as well as issuers’ website. In addition, we reviewed the various responses the CBIC has written over the years regarding enhancing transparency in the covered bond market.
To view the response, click here.
CBIC responds to European Commission consultation on covered bonds
6 January 2016 The ICMA AMIC Covered Bond Investors Council (CBIC) has responded to the European Commission’s consultation on Covered Bonds in the European Union. The consultation was launched on 30 September 2015. The CBIC noted the underlying assumption in the economic analysis that the extreme convergence of covered bond spreads before the crisis should be the norm and that subsequent events point to a sub-optimal fragmentation of markets within the European Union. However, CBIC members argued that markets prior to 2007 had mispriced risks inherent in the securities and that a return to that condition was not necessarily a desirable outcome. Particularly in the absence of implicit state support for the banking system, different covered bonds do reflect different underlying risk characteristics and it is the job of the market to identify and price these risks appropriately.
With regard to the main question in the consultation, the two options for covered bond harmonisation, the CBIC noted that there was insufficient detail in the consultation to give a definitive view. Some CBIC members believed that voluntary convergence of national regimes would suffice, particularly if backed by measures like capital requirements referencing the best practice guidelines. Other CBIC members expressed a preference for an EU legal framework with minimum standards based on current best practice.
To view the response, click here.
CBIC responds to ESMA Consultation Paper on EMIR Clearing Obligations IRS
18 August 2014 The CBIC responded to the Consultation Paper launched by the European Securities and Markets Authority (ESMA) on 11 July 2014 on the Clearing Obligation under Regulation (EU) No 648/2012, which outlines the framework of the European Market Infrastructure Regulation (EMIR).
The CBIC only commented on the section of the Consultation Paper which focuses on the treatment of covered bond derivatives. The CBIC is concerned that whilst the consultation should centre on covered bond derivatives, ESMA is in effect making a legal statement regarding the European covered bonds regulatory framework, through statements on the posting of collateral and listing criteria related to the inclusion/exclusion of contracts associated to defined covered bonds programmes.
To view the response click here.
CBIC views on the Covered Bond Label
7 March 2014 The CBIC has issued a statement welcoming the infrastructure the Covered Bond Label has put in place for further strengthening of the European covered bond market, and noting the improvement in the minimum transparency requirement.To achieve a high quality label and for investors to fully benefit from the Label, the CBIC believes an enhanced transparency regime, converging with the CBIC transparency standards, following a coordinated and step-by-step approach, is key.
To view the statement click here
CBIC supports the inclusion of covered bonds in LCR Level 1
The CBIC has issued a statement in support of the inclusion of covered bonds as extremely high liquid assets under the Liquidity Coverage Ratio (LCR) within the new liquidity provisions for the European banking sector.
To view the statement click here.
CBIC submits response to Moody's request for comments
21 October 2013 The ICMA AMIC Covered Bonds Investors Council has submitted a letter in response to Moody’s request for comments: "Approach to Determining the Issuer Anchor Point for Covered Bonds".
To view the response, click here.
A new CBIC working group to be established
The Covered Bond markets have shown continuing growth in recent years, both in terms of volume as well as geography. As the market keeps growing including in terms of diversity and products, the CBIC wants to keep pace with new developments and is therefore setting up a new working group. This group will deal with existing and; if and when the need arises, new and innovative Covered Bond structures. The aim of the working group is to increase the understanding of the nature of the specific innovation and to put it into context within already established structures and/or legislation.
The ultimate goal is not to come up with an individual CBIC definition of what constitutes a Covered Bond but to have a comprehensive set of criteria at hand for investors to decide whether a new product which calls itself a Covered bond is eligible for their individual Covered Bond portfolios/mandates. Accordingly, we call our new working group “Cola” – “Covered Bond look alike”.
The new working group is also open to a dialogue with issuers ahead of a possible launch of any product which is planned to be named a Covered Bond. We also aim to establish this working group for entering into a dialogue with the relevant bond index providers when it comes to classifying new products.
We invite all investors with a dedicated interest in this asset class to take part.
CBIC statement regarding covered bond rating methodologies in the challenging environment
The CBIC has issued a statement to the rating agencies based on discussions within its membership.
CBIC - European Transparency Standards
Investors have been asked many times by issuers, in different contexts, what their information needs are. So far there has been no single answer to this question but following the growth of the covered bond market there has been an increased fragmentation in the information provided by issuers.
Therefore the CBIC set-up a transparency working group which has tried to indentify key information investors in covered bonds would need to make better informed investment decisions.
A public consultation was launched on April 14, all documents are available here.
The CBIC is currently conducting its second round of consultation with its membership and the respondents to the consultation. Click here for more information.
CBIC statement on the on-going usage of ‘shadow / IOI’ books
The financial crisis and the high degree of uncertainty in the capital markets justified closer direct communication between issuers and investors. Investors fully understood their responsibility to support the Jumbo Covered Bond Market and gave very detailed guidance for successful deals in addition to the book-building process. A well-functioning primary market is in the interest of all market participants.
The traditional official opening of a primary book and pricing the following day is not in fact different from the currently used shadow book building with screen announcements, official opening and pricing the subsequent day. However the use of the shadow book building process means that the opening of the book is limited to a few hours compared to a whole day in the traditional book building process. This restricted opening time limits the scope of investors to evaluate the information provided on new issues. This is also damaging in the case of smaller investors who may not be pre-sounded.
CBIC also wants to draw attention to the increased risk of regulatory “inside information” concerns that arise from the current use of shadow book building.
In light of these observations, the CBIC urges issuers and their lead managers to return to using the traditional book-building process rather than the shadow book building process. The CBIC recommends the adoption of a longer fixed timeframe during which books would be open rather than the over hasty closing of books.