A deal by HBOS last month signalled the birth of a UK market in covered bonds. Now all eyes are on regulators to clear up confusion about the capital that bank investors should hold against investments in these deals.
The €3 billion issue is the first time a UK bank has tapped demand for covered bonds from institutional investors in Europe that have been buying German Pfandbriefe for years. But the bond is risk weighted at 20% – twice the figure for an equivalent German deal – so banks that buy it must hold $1.6
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