The new U.K. prime minister, Gordon Brown, said recently that the government will begin to draft new legislation to help regulate and promote covered bonds. Inevitably, the new regulations will boost covered bond issuance, sources say.

Brown's announcement came as a relief to market players, although some questioned the prime minister's motivations. "The [U.K.] Financial Services Authority has said it would do that from last year," said a covered bond analyst at a London-based investment bank. "The new regulations will do away with the contractual deal-by-deal model currently in place, in favor of one single regulatory method that will help boost the industry."

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