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18 July 2014
Richard Kemmish

For those of us of a certain age Vienna will always be a by word for the worst excesses of the new romantic movement (“Alone in the night as the daylight brings a cool empty silence” – how did we ever take those lyrics seriously?). This September however it gets a chance to redeem itself as the venue for the Euromoney /ECBC covered bond conference.

The evolution of the event over the last decade has not surprisingly mirrored the development of the covered bond market itself. They have both grown rapidly (a compound annual growth rate of about 15%), and they have both become much less Germanic (from more than half to less than 20% in terms of both conference attendees and bonds issued), and less European (circa 10%, on the same two metrics). Which is I suppose inevitable.

But what is more telling is the change in the topics that we discuss. In the early days of the conference it was very introspective – how anyone could find interest in a panel comparing Nordic issuers is as much of a mystery now as my 14 year old self’s devotion to Ultravox.  There will not be a Nordic issuers panel in Vienna.

There will also not be a rating agency panel. Ten years ago Moody’s, S&P and - the then new kid on the block - Fitch would argue about fundamentals of how to rate covered bonds. They are still changing their methodologies (if anything at a faster rate now than before), but seemingly from a position of relative consensus on how covered bonds should be rated.

Is it possible that all of those debates on whether the Norwegian or Swedish model was best or whether ratings should be driven by the bank or structured finance teams actually arrived at some kind of consensus over the last ten years?

But looking at this year’s agenda it feels like a continuation of the trend away from introspection and towards a consideration of the ‘big picture’.  Where once we considered the relative merits of public sector and mortgage pfandbrief, now we discuss our role in the funding of the European recovery. Where once we discussed how many book runners was ideal, now we are discussing whether covered bonds can solve the world’s housing shortage.

An inevitable response to the fundamental questions asked by the financial crisis? A consequence of our moving from cottage industry to mainstream financing tool? A realisation that regulators and politicians expect a lot of us? All of the above?

Or are we just maturing, as hopefully, our musical taste has since the early days.

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Tags: Covered Bond