The Federal Deposit Insurance Corp. (FDIC) board yesterday approved a final covered bond policy statement, according to an FDIC press release.
The policy statement intends to facilitate the development of the U.S. covered bond market by providing bondholders expedited access to collateral if the FDIC declines to continue the covered bonds after a bank failure.
In Europe, where these are more widely used, covered bonds are subject to extensive statutory and supervisory regulation designed to protect the interests of covered bond investors from the risks of insolvency of the issuing bank.
By contrast, covered bonds are a relatively new innovation in the U.S., with only Bank of America and Washington Mutual thus far.
The final statement comes after an earlier one published on April 23, which received widespread support from national banks, federal home loan banks, industry group, and individuals, according to the release.
The supporters favored the clarification as to how the FDIC would treat covered bonds in the case of a conservatorship or receivership.