Australia opens the door to covered bonds

Australian banks, credit unions and building societies will soon be able to issue covered bonds as part of the Australian Federal Government's package of banking reforms aimed at increasing competition within the banking sector, announced on Sunday 12 December 2010.

What was in the package?

This package consists of three streams of reform:

1. "Empowering consumers to get a better deal" which includes such reforms as banning exit fees for new home loans and boosting consumer flexibility to transfer their deposits and mortgages;
2. "Supporting small lenders to compete with big banks" which includes the Government committing to invest a further $4 billion in the Australian Office of Financial Management's investment programme to support the RMBS market and facilitating issuance of bullet RMBS as an alternative to traditional RMBS; and