(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: Banks' Use of Covered Bonds: 2014
PARIS/LONDON, June 12 (Fitch) Fitch Ratings says that banks'
overall cover pool
encumbrance has remained broadly stable in the past three years
in an update of
its report on covered bonds-related asset encumbrance.
Total outstanding covered bonds sold to the market from the
banks included in
the report decreased by 6% in 2013, reflecting reduced funding
needs but also
banks' stronger focus on issuing unsecured senior and
subordinated debt. Excess
liquidity in the markets and a less stressed environment
improved market access
and hence credit spreads, leading banks to issue on the
unsecured debt markets.
The narrow spread differential has been an incentive for issuing
unsecured debt rather than covered bonds.
The same countries top the list as last year, namely Denmark,
Germany, Spain and
Sweden. Fitch considers these countries, as well as France and
Norway, to be
covered bond-intensive jurisdictions. Cover pools alone
encumbrance for only a small number of rated banks. Of the 142
entities in the
sample, 15 have cover pool encumbrance above 50% of end-2013
adjusted assets, of
which only six are above 70%.
Like last year, two Danish banks, Realkredit Danmark and
and Swedish Landshypotek top the list. Asset encumbrance above
80% is a
reflection of their business models, based on covered bond
believes that covered bond funding can be a stable form of
in markets where households invest a significant amount of their
wealth outside the traditional banking system. This is
especially the case in
The European Union Bank Recovery and Resolution Directive states
liabilities, including covered bonds, are exempt from bail-in.
Bail-in of senior
unsecured creditors allows recapitalisation without wind-down,
enabling banks to
be resolved without liquidation and to be restored as a going
concern with dual
recourse remaining available to its covered bond investors.
However, it is
important to note that there are other sources of bank asset
covered pool encumbrance limited for a large number of rated
banks. Almost 70%
of the issuers in the report had a cover pool encumbrance below
20% of adjusted
assets at end-2013.
The report, "Banks' Use of Covered Bonds Funding: 2014 Update",
is available at
www.fitchratings.com or by clicking the link above.
Olivia Perney Guillot
+33 1 4429 91 74
Fitch France S.A.S.
60, rue de Monceau
+34 93 323 8408
Media Relations: Elaine Bailey, London, Tel: +44 203 530 1003,
Elaine.Bailey@fitchratings.com; Hannah Huntly, London, Tel: +44
20 3530 1153,
Additional information is available at www.fitchratings.com.
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