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The 17th Euromoney Covered Bond Forum was held again in Munich with over 1,100 delegates from more than 35 countries attending. Dominant themes of this year’s congress included the implementation and implications of the new covered bond directive, the continued growth of green covered bonds and the problems caused by increasingly negative yields. Coincidentally, the conference coincided with the announcement by the ECB of a new round of financing including more purchases under their quantitative easing programme and an expansion of the TLTRO facilities which provide a cost effective rival to the asset class.
Many panels discussed the rapid growth of green and sustainable covered bonds. Although the technology underlying these is largely understood now there was considerable debate in several panels on topics including the definition of sustainable, as opposed to green, covered bonds, the potential of the underlying assets to contribute to the reduction in carbon emissions, in particular via the Eemap initiative and alternative financing tools that can contribute to climate goals, such as short term paper and ESNs.
The ESN discussion – the application of covered bond technology to other asset classes – was another theme discussed extensively. Whilst some panellists pointed out that this was clearly an objective of the incoming Commission, a dedicated round table expressed some scepticism about the market need for such an instrument in particular in the light of the funding conditions for covered bonds as a result of the ECB’s purchase programme and the TLTRO programme.
The implementation of the new covered bond directive was discussed at length on many panels and in one roundtable focussed on the technical details. Key themes that came up throughout the day included whether the 30 month implementation period was sufficient, the application of the equivalence rules for covered bond jurisdictions outside the European Economic Area and the use of the directive to help new jurisdictions develop their markets.
The topic of new jurisdictions was, as ever a major talking point. Japan, Brazil and Romania were all newcomers since the last conference and there was considerable speculation about developments in other countries including the Baltic states, Malaysia and Bulgaria. A topic frequently considered in this context was the competing approaches of a covered bond law and the use of contract law as has been successfully demonstrated by SMBC.
Overshadowing much of the day was the ECB’s announcement and the fact that this is likely to push the covered bond market to even deeper negative yields. The implications of this for the development of the market and for the investor base becoming increasingly technical in nature was a topic of concern to many speakers.
Despite concerns about the yield environment, the covered bond market has returned to a period of growth in its core European jurisdictions to complement its increasing growth on a global scale. Its potential to support wider societal goals, the introduction of new technology and new asset classes ensured that the conference had a fundamentally upbeat theme.
For sponsorship opportunities for the 2020 Congress, please contact: Andrew Walmsley, Head of Sales, Capital Markets: firstname.lastname@example.org +44 (0) 20 7779 8043
For speaking opportunities in 2020, please contact: Emma Summers, Head of Covered Bonds Series: email@example.com +44 (0) 20 7779 8397