An Update on Structured Covered Bonds

• Covered bond issuance is very attractive to banks and other financial institutions because it offers potential funding advantages including access to new and wider investor bases and relatively low costs of funding.

Since HBOS completed its first structured covered bonds issue in July last year (which we reviewed in April) the UK covered bonds market has rapidly expanded. HBOS followed up its first issue with three further issues - bringing its total covered bond issuance to €8.5bn. Northern Rock and Bradford & Bingley, two other UK banks, have also established structured covered bond programmes. Northern Rock went to market with a €2bn issue in May this year. Bradford & Bingley followed soon after with a €2bn issue of its own.