Covered bonds have become increasingly important component in the funding of financial institutions in Europe, because they provide cost effective funding, with a low execution risk, long maturities, and help issuers and investors diversify their portfolios of liabilities and assets respectively. The structure and security of covered bonds have set this asset class apart and they have remained largely acceptable to an increasing number of investors throughout the turbulent conditions of recent years.
Recent growth of the European covered bond market has lead to a degree of fragmentation in the level of information provided to investors on individual issues. Faced with a rapidly expanding covered bond universe investors are increasingly in need of comprehensive and readily comparable information in order to make informed investment decisions. The CBIC initiative proposes agreed transparency standards for issuers in this market based on the information requirements of investors.
The CBIC set up a transparency working group which has tried to identify key information which covered bond investors require to make well informed investment decisions. It is expected that the information required would be available on a regular basis (e.g. a half yearly update) to meet investors’ transparency and information needs. Beside the quantitative information provided via a spreadsheet, some qualitative information is requested to explain the figures and make the data more comparable. The CBIC believes that issuers should consider these qualitative elements and ensure a certain degree of consistency, most urgently at national level. The CBIC transparency data list is divided into two main sections and is available in an Excel Format:
- General Issuer data
- Cover Pool data
The ICMA AMIC Covered Bond Investor Council asked market participants to comment on the format and content of the transparency standards. Market participants were also asked to comment on the accessibility of the information.
The CBIC thanks all participants for their comments regarding the CBIC European transparency standards project. CBIC members have produced a statement in the Fourth Quarter 2011 ICMA Regulatory Policy Newsletter (page 32).
Below are the publicly available comments received by the CBIC on its consultation (last update 14 December 2011)
- Association of German Pfandbrief Banks (vdp) (13 December 2011)
- Association of Swedish Covered Bond issuers (ASCB)
- Crédit Foncier de France
- European Central Bank
- European Covered Bond Council (ECBC)
- Norwegian Covered Bond Council (FNO)
- Pfandbrief and Covered Bond Forum Austria
- Pioneer Investments
- UK Financial Services Authority, HM Treasury, Bank of England
- UK Regulated Covered Bond Council (RCBC)
Institutions supporting enhanced transparency standards in the European covered bond market
- Allianz GI "[Allianz GI] is strongly supporting your initiative. It believes that in financial market, transparency means also confidence and both lead immediately to efficiency."
- Generali Investments
- Legal & General IM "Legal & General Investment Management welcomes initiatives to raise the level of disclosure on covered bonds and their issuers to facilitate the analysis and comparison of their credit quality. The CBIC's proposal for common European transparency standards is a constructive step in the right direction".
- Norges Bank Investment Management
- Pioneer Investments
- Schroders "The Covered Bond market is no longer a niche source of funding for a few privileged financial institutions. Schroders is supporting enhanced transparency standards to develop a truly efficient international and global permanent market."
- SwissLife Asset Management GmbH
- Talanx Asset Management GmbH
- Union Investment
Please note that the list of institutions supporting enhanced transparency standards is constantly being updated.
The CBIC is currently conducting its second round of consultation with its membership and the respondents to the consultation. Click here for more information.