Royal Bank of Canada and Canadian Imperial Bank of Commerce launched their covered bond programs under the new covered bond framework in Canada, according to a press release from the Canada Mortgage and Housing Corporation (CMHC).
The framework, enacted in December 2012, restricts the assets that can be used to collateralize covered bonds to uninsured residential mortgages. Covered bonds secured by insured residential mortgages can no longer be issued.
According to Standard & Poor’s, RBC’s new program is an amended version of its previous program since it already benefited from the fact that it was the only Canadian bank to issue only non-insured collateral to include in covered pools. CIBC has set up a new program.
“Having met the requirements of the program, CIBC and RBC are now in a position to issue the first covered bonds under the framework,” said Douglas Stewart, interim President and CEO of CMHC. “We expect that other issuers will soon have registered programs in place.”
In a report today, Bank of America Merrill Lynch said that as Canadian issuers launch new covered programs, issuance volumes are likely to pick up again during the second half of 2013. Canada has seen no issuance this year.
However “new issuance might be less buoyant than in the past,” said analysts because of the later timing of when these programs come to market; the softening in the mortgage lending market; collateral management that limit issuance.