Italy has completed the first phase of introducing its new structured covered bond legislation, making way for the large issuance most industry players are expecting from the sector. In general, most European countries are making strides to accommodate the potential for structured covered bonds - heralded as the next big thing in Europe.

"In Italy we updated the existing securitization law (Legge 130/1999) to enable structures that are similar to what we have seen in the U.K.," explained Michele Cueno, an analyst at the Fitch Ratings Milan-based office. "To put it simple, the covered bond is directly issued by a bank and guaranteed by the collateral that the bank itself segregates' by selling it to an SPV governed by existing securitization law. You can appreciate how this is quite similar to the way covered bonds are set up in the U.K., with the difference that the structural framework here is set up by law."

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