Covered Bonds

Course Overview The covered bond market grew strongly in the period 1995-2008 spreading from its original jurisdictions of Germany and Denmark throughout continental Europe and on to the UK, US, Canada and Asia. Following the collapse of Lehman Brothers, the market, in common with many other markets, suffered severe spread widening and a lack of liquidity. Although public markets where subdued, the number of issuers doubled during 2008/09 as financial institutions found the need to tap central bank repo facilities through covered bonds programmes. 2010 has seen a moderate return of public issuance in a market which has been strongly supported by the ECB and individual central banks. Over the next few years covered bonds are expected to be the major source of term funding for financial institutions. This Euromoney training course is designed both for those that are new to covered bonds and also for issuers or investors who wish to add to their know-how and understand the latest developments in, and the forces driving, the postcrisis market. Attend this comprehensive 3-day course presenting all aspects of covered bonds for issuers, investors, structures and analysts and you will: Learn the key features of one of the top three global fixed income markets. Understand why the market uniquely combines major key characteristics of unsecured funding and asset securitisation. Assess the legal and regulatory factors in the principle covered bond jurisdictions. Evaluate the different rating agency approaches and methodologies to covered bonds. Explore the importance of ECB intervention in European covered bond markets and the effect on pricing and liquidity. PLUS: Real-life insights and presentations from expert practitioners from some of Europe’s biggest covered bonds issuers. This course has been specifically designed for the benefit of: Structurers Issuers Investors Analysts Rating Agencies Bank Supervisors Regulators Supported by:
Day 1 Introduction Identify existing knowledge of covered bonds Fundamental Features of Covered Bonds Key characteristics of covered bonds The legal basis - regulated covered bonds - structured covered bonds Distinguishing Covered Bonds from other Bank Funding Tools Unsecured senior debt Distinction between covered bonds and RMBS Collateral Assets Kinds of covered bonds issued to date - residential mortgages - commercial mortgages - public sector debt - aircraft and shipping - mixed portfolios GUEST SPEAKER PRESENTATION The Issuers’ Perspective and Process Why issue covered bonds? Establishing a covered bond programme Issuing a euro benchmark Neil Sankoff, Head of Senior Funding, Global Balance Sheet Management, HSBC Covered Bond Markets Geographic spread of covered bond issuance Jumbo and benchmark covered bonds Market size and country breakdown The Principal Markets – Germany The legal framework The regulatory framework Typical issuing structure Covered pool asset types The market Standard & Poor’s Covered Bond Methodology The new approach post December 2009 revision to methodology The five risks that make up the S&P’s analysis - asset risk - cash flow risk - legal risk - operational and administrative risk - counterparty risk - typical issuing structure - eligible asset classes - bondholders legal privilege - regulation and supervision Workshop: Delegates will work in groups to analyse a German covered bond transaction and then present their feedback to other groups Day 2 The Principal Markets – France The legal framework Typical issuing structure Eligible collateral and mixing Bondholders legal privilege Regulation and supervision Fitch Covered Bond Methodology New approach developed during 2009 Three key factors: - probability of default - ability to maintain payments following a default - recovery prospects from default to maturity GUEST SPEAKER PRESENTATION 2012-2013 Covered Bonds Stay on Top · Regulatory changes and attitudes · The Bail-in debate · How spreads have moved and why · The relationship with senior unsecured · New structures under the old format- SME and beyond? · Asset encumbrance and points of non-viability · What next for the asset class? Tim Skeet, Managing Director, Global Banking & Markets, The Royal Bank of Scotland Investing in Covered Bonds Country risk and yield appetite Asset type Duration risk Re-finance risk Rating volatility/notches of safety Pricing and risk weighting Workshop: Delegates will work in groups to analyse a novel French covered bond transaction collateralised by export credit loans and then present their feedback to other groups Day 3 Moody’s Covered Bond Rating Methodology 2005 methodology with 2013 update Two-stage process: - probability of default - timely payment indicators - haircuts for highly rated issuers The Principal Markets – Spain The legal framework Three broad types Eligible assets and coverage ratios The regulatory framework Central Bank Support for the Covered Bond Market The big picture: ECB total support - the time line ECB repo programme ECB covered bond purchasing programme ECB securities market programme BoE special liquidity scheme BoE open market operations Discount window facility HM Treasury credit guarantee scheme ECB/BoE comparison of intervention Unwinding previous intervention Course Summary, Delegate Feedback and Close