Euromoney/ECBC Asian Covered Bond Forum

The 3rd Euromoney/ECBC Asian Covered Bond Forum attracted a record audience of 189 investors, policymakers, issuers and intermediaries on Tuesday 8 March at the Marriott Tang Plaza, Singapore, cementing its place as the most influential covered bond event in Asia.

National authorities and banks throughout Asia are looking at how they can use covered bonds to meet their funding and financial stability needs. Singapore and South Korea have led the way, with debut deals from DBS and Kookmin Bank launching in those markets in 2015. In his opening address at the 2016 Forum, Luca Bertalot, Secretary General of the ECBC, focused on the stability and reliability offered by covered bonds as a funding tool, and the importance of international coordination of frameworks and regulatory treatments to ensure the most successful expansion of the product into new markets. He referred to the fact that DBS Bank of Singapore had been awarded the first ever non-European Covered Bond Label as an example of the potential for international coordination of the market.

The opening panel, Covered Bonds and the Asian Banking System, followed on, analysing the potential for covered bonds throughout Asia and why the product could still be of use and attractive, even in countries where banks can comfortably fund themselves via deposit funding such as Singapore.  The second panel, Lessons from the Asian Debut Deals, provided an opportunity for our audience to hear directly from Kookmin Bank, DBS and UOB – who had just completed the first ever Euro denominated, legislation backed covered bond from Asia the week before the conference. The issuers provided an insight into how they had set up their programmes, the rationale behind their decisions to issue off shore, and the investor reaction to their trades so far. Panellists also discussed the prospects for the development of a Singapore dollar denominated covered bond market. The third session moved on to the European market, focusing on the core home markets for the product. With many regulatory pressures in Europe, such as the European Commission’s consultation on covered bonds and the continued market distortion caused by the ECB’s CBPP3, many issuers and investors may be concerned about the market’s structural integrity. The panellists maintained that there is still value in European covered bonds, including as a liquid alternative to more expensive German government bonds, but admitted the challenges given Berlin Hyp’s deal becoming the first with a negative yield on the exact day of the conference.

After lunch, attendees enjoyed hearing an informative in depth discussion of structure and regulation, focusing on market supervision, regulatory treatment for investors, and supervisory responses and structural support in the event of a failure of an issuer.  Finally, to round off the day, the closing panel looked at the big picture of where the Asian market might go next. Cagamas presented the case for Malaysia to develop a covered bond framework, confirming that they expect one to be in place within the next five years and for it to include a local market. SumitG, the Guaranteed Secured Obligation Issuer jointly guaranteed by Goldman Sachs and Sumitomo Mitsui Trust Bank, shared details of their structure and how it might be replicated in Asian countries without a legally enshrined covered bond framework. The rest of the discussion focussed on how covered bonds in new emerging market jurisdictions might differ from the traditional format, what kind of investors might buy them, and how covered bonds could contribute to the development of wider local capital markets.

Overall, we are delighted with the success of the conference again this year. We would like to thank our co host, the European Covered Bond Council (ECBC), and all our sponsors who made the event possible. Thank you to all our speakers and delegates for participating. We very much look forward to reconvening next March to support the development of the Asian markets for covered bonds.

Tue 08 Mar 2016

Singapore Marriott Tang Plaza Hotel, Singapore