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Wednesday, 16 April 2014

Covered bonds not imminent in Greece

While the Italian covered market has been conspicuous by its absence, it is likely to establish itself some time before its Greek neighbour – the only other “large” Eurozone jurisdiction that is still to get of the ground.

Greece released its primary legislation for covered bonds towards the end of last summer. While already approved by Parliament and containing many necessary facets that indicate a solid legislative framework, many details are still fairly general and will be left to secondary legislation which will then have to be signed off by the Bank of Greece.

“In our view, this way was chosen intentionally in order to leave sufficient room for secondary legislation and detailed regulations following a consultation period for Greek banks,” said UniCredit in a release. “We welcome the implementation of a trustee, the stipulation of overcollateralisation, the implementation of a register, and the preferential claim on cover assets. The very broad definition of eligible assets, however, needs some more clarification in order to draw a comparison with other frameworks.”

It is therefore a little premature to forecast when the first Greek covered bond will grace the market. One originator pointed out that this is probably still quite some way down the line as many potential Greek covered bond issuer’s systems still need some work, the legal process has taken longer than anticipated and most importantly, banks that could potentially issue covered bonds are sufficiently liquid. So far the National Bank of Greece and Piraeus Bank Group have voiced plans to issue covered bonds in the future.

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