The countdown begins

28 Aug 2015 | Richard Kemmish


Every true covered bond aficionado is counting down the days. Speedos and sun cream packed. Off to Barcelona!

Considering that we, as a market, have a reputation for never changing this year’s conference would be unrecognisable to the attendees of the first Euromoney covered bond conference, twelve years ago (see previous post).

On a superficial level its going to be far larger (about six times as many people will attend) and far more diverse (at least by nationality, if not by age, gender or fashion sense).

More importantly a simple glance at the agenda suggests that it is going to be discussing totally different topics from that first conference.  There will be no panel this year comparing the approaches of the rating agencies, or arguing whether the Swedish or Danish model is better, or speculating about which western European country will be next to pass a law.
 
 What we will discuss will be defined by two dominant, and related themes.

Covered bonds are no longer a parochial topic. We’ve gone big picture. In previous conferences the head of funding of a bank may have spoken about how many basis points they save relative to senior unsecured debt or whether covered bonds or securitisation are more collateral efficient. This time we are speaking about the role of covered bonds in the new financial architecture (immunising banks from extreme stress scenarios), in macro-economics (the role of covered bonds as an instrument of quantative easing), and in social policy (increasing home ownership, encouraging responsible lending). Heady stuff.

The other key theme looking at the agenda is the growth of the new covered bond markets. No fewer than five sessions will be discussing aspects of the new jurisdictions. That there is little or no overlap between these sessions is testament to how much there is to discuss there. In other words, how much innovation is happening in the covered bond market.

Of course these two trends are both consequences of the product’s enhanced reputation as a result of the financial crisis. On the one hand, covered bonds are being used as an instrument of policy to both address the immediate economic needs and to contribute towards the new financial landscape. On the other hand, countries that have not had covered bonds, who previously had assumed that securitisations were the most appropriate funding tool for their nascent capital markets, are reappraising the product as a result of its success.

But has the conference really changed? We are a conservative market, the reputation is justified. It takes a lot to come to terms with fundamental changes in well established markets. Twelve years ago in Amsterdam that change was caused by new countries, such as Britain or new structures such as asset cover tests, threatening the old certainties. Now it is new countries outside western Europe, and new asset classes such as SMEs. But the reaction to change is the same.

Twelve years from now we might find it incredible that we once felt an urge to discuss SME loans or emerging markets as if they were some kind of game changer.


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