Covered Bonds

Our knowledge of bank regulatory issues, financial institutions and financing techniques makes us the first call for covered bond issuances by market participants.

Covered bonds are debt instruments that have recourse either to the issuing entity or to an affiliated group to which the issuing entity belongs, or both, and, upon an issuer default also have recourse to a pool of collateral, called the cover pool, separate from the issuer's other assets. The cover pool consists of high quality assets, including residential-mortgage backed securities, public debt or ship mortgages. Typically, covered bondholders have a privileged or preferential claim (embodied in statute, in Europe) against the cover pool in the event of the issuer's insolvency. By contrast, in a securitization, an investor only has recourse to the special purpose entity that issues the securities and to that issuer's assets, which include the asset pool and its cash flows. From the issuer's perspective, covered bonds remain on the issuer's balance sheet, whereas securitized assets are off balance sheet. Covered bonds are issued by depositary institutions that are regulated entities subject to supervision by domestic banking authorities, which ensures that regulators would step in if a safety and soundness issue were to arise.

We have been involved in nearly $100 billion of covered bond offerings. We draw on our covered bond experience in New York and London and the unique experience of our Washington, D.C. office in dealing with the U.S. Securities and Exchange Commission, the Department of Labor, OCC, Federal Reserve and FDIC on regulatory matters critical to covered bonds. We have been actively involved in advising European issuers on U.S. dollar issuances. We have also been an active participant in the development of U.S. covered bond legislation, including discussions with the U.S. Treasury, FDIC, legislators and Capitol Hill staff.

Read more about covered bonds:

• Covered Bonds Handbook

News Alerts

• Relief for Covered Bonds as ESMA refines the Clearing Obligation
• Comment Letter: The Development Of A Responsible Private Label Securities Market
• Volcker Rule and Covered Bonds
• Liquidity Coverage Ratio Impact on Covered Bonds
• Bright Outlook for Covered Bonds
• SEC Registration of Covered Bonds
• SEC Registered Covered Bonds
• Covered Bonds: 2011 – The Senate
• Covered Bonds: 2011 – The House II
• Covered Bonds: 2011 – The House
• Review of UK Covered Bond Framework
• Senate Committee Hearing on Covered Bonds
• Covered Bond Legislation Passed by the House Financial Services Committee
• Covered Bond Legislation: Is the Fourth Time the Charm?
• Hearing on Covered Bond Legislation
• U.S. Covered Bond Legislation Introduced in Congress
• An Update on Covered Bonds
• Update on the FSA’s Approach to Covered Bond Issuance and Asset Encumbrance
• Treasury Announces Best Practices for Covered Bonds
• The FDIC Offers Certainty on Covered Bonds – a step in the right direction
• Something to Talk About
• Covered Bonds and U.S. Regulators

Article

• An analysis of covered bonds and the US market by Jeremy Jennings-Mares and Peter Green.
  © This article was first published in the Capital Markets multi-jurisdictional guide 2015/16 and is reproduced with the permission of the publisher, Thomson Reuters.

U.S. Legislation and Resources

• Current Senate legislation
• Current House legislation
• Treasury Best Practices
• Final FDIC Statement
• FDIC Interim Policy Statement
• Bloomberg Law Podcast: Covered Bonds
  (click to listen to the podcast)
• Frequently Asked Questions about Covered Bonds 

UK Legislation and Resources

• The Regulated Covered Bonds Regulations 2008
  (SI 2008/346)
• FSA Regulated Covered Bonds Sourcebook
  (part of the FSA Handbook)
• FSA factsheet on the UK Regulated Covered Bonds regime
• FSA Regulated Covered Bonds Register
• Application for registration and other relevant forms for Regulated Covered Bonds
• FSA's 23rd October 2008 Letter to the BBA on Covered Bond Issuance and Asset Encumbrance

Download Considerations for Foreign Banks Financing in the US (2014).

See also Recent Attorney Publications for additional articles.

Client Stories - We're Only as Good as Our Last Deal

Read more about what we've been up to lately (documents in pdf format):

Capital Markets

• PIPE Transactions—Problem. Creativity. Solution.
• Hedging PIPEs—No Need to Call the Plumber, Martha. That's a Derivative Embedded in the PIPE
• Registered Directs—A Public PIPE
• Dribbling It Out—Equity Distribution Programs
• Open IPO—Auction Distribution Methodologies
• Incapital—Bonds Made Simple
• BASICS—What's in a Name
• Passave—The Cash-Only Line
• An Organic Makeover—Protalix
• Call It What You Will—Pre-Marketed or Wall-Crossed: The New Offering of Choice
• Time and Time Again—An Innovative Use of an ATM
• Specially Purposeful—Helping a Special Purpose Acquisition Company Finance
• Lonely at the Top (of the World)—Restructuring and Recapitalizing Icelandic Banks
• Showdown in the American West—Main Street vs. Wall Street
• Acquisition Well Planned—The Acquisition of Morgan Keegan
• Bought and Sold—A Bought Deal
• Up, Up and Away—The Up-C IPO
• Driven—Mobileye’s Private Equity Financing
• Good to be Green—First Corporate Issued Green Bond
• Arctic Full Circle—Islandsbanki
• Back to the Future—Mobileye IPO
• An (Ice)land-mark Transaction—LBI Resolution Proceedings
• Stabilizing a House of Cards—Residential Capital
• Greenland’s Ports Weren’t Built in a Day—Sikuki Nuuk Habour Financing

Derivatives and Structured Products

• Your First Time?—Issuing an Exchange Traded Note
• Betting on Oneself—Issuer Equity Derivative Transactions
• UBS—Tailor-Made
• Monetizations—Cashing In Without Cashing Out
• Happy Meals—144A Converts
• Deferred Compensation—Immediate Solution
• Derivatives on Steroids (Notionally)—Leveraged Total Return Swaps
• "Intelligent Design"—Evolutionary Changes in Equity Derivatives
• Weakness of Power—Collateralized Hedging Programs for the Energy Market
• Hedging Hedge Funds—Financing Hedge Funds
• Fast Forward—A Forward Sale
• Credit Where Credit is Due—Structured Products with Embedded Credit Default Features
• A Matter of "Principal"—Structured Products with Principal Protection
• Who's Got the Power?—Energy Commodity Linked Structures and Energy Transactions
• Jack of All Trades—Master of Structured Products
• The Odd Couple—Structured Products and Life Insurance
• Holy BOLI!—Diversified and Principal-Protected
• Power to the People—MLPs
• Mind the Gap—The Equity Gap
• The Dividend Link—Dividend Returns in a Structured Note
• Researching an Answer—Research-Based Structured Notes
• Making an Impact, Literally—NPX

Structured Finance and Insurance-Linked Products

• Lucrative Knock-off—Covered Bonds in the U.S.
• Northern Lights—Canadian Covered Bond Issuers
• Not Exactly Born in the USA—U.S. Registered Covered Bonds
• Catastrophe Bonds and Side Cars—Whose Risk is it Anyway?
• Life Settlements and Premium Finance
• Life Insurance Securitizations and Structured Products—Where Morality Risk Meets the Capital Markets
• Monolines—Ambac, FGIC and PMI
• Restarting the Mortgage Markets—Linking Community Lenders to the Capital Markets
• The New Gold Standard—BMO Vaulted Gold Bullion Trust

Hybrids

• The Elusive D Basket—Hitting the Trifecta
• Hybrids: A Case Study—Saving Tax Dollars Makes CENts
• Hybrids: A Case Study—Hitting it out of the Park: Bank of America Corporation HITS
• Synthetic Equity—It's the Real Thing
• Hybrids in Japan—Softbank Corp.