A recent survey conducted by Information Management Network (IMN), found that securitization market participants believe that the development of a U.S. covered bonds market is long overdue and the introduction of more private capital will be a positive move for the space.
According to the survey, 37.5% of the participants believe the U.S. market would benefit from a covered bonds market and only 21.6% of the respondents said that the U.S. market will not benefit from the proposed bill.
In the U.S., there have been several moves to introduce a covered bonds market. The most recent proposed legislation, HR 940: United States Covered Bond Act of 2011, is the industry’s latest attempt to gain momentum.
“The U.S. covered bonds market has the potential to increase mortgage financing, improve underwriting standards and provide financial institutions with a new and flexible source for funding,” said Michael Durrer, partner at Sidley Austin LLP. “It could also limit the movement of U.S. funds flowing into overseas products.”
Nearly half of participants (48%) also suggested the Trade Reporting and Compliance Engine (TRACE) will continue to improve the industry’s processes and efficiencies in the future. Only 25% said it would bring unnecessary strain to the market and 26% said it would have little or no effect on the industry.
“Regulation has been on everyone’s minds in the industry,” said Jade Friedensohn, senior vice president, structured finance at IMN. “As this market matures and more developments emerge, industry professionals and their companies are forced to reevaluate their practices to meet the demands of the new regulatory environment."