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Covered bonds: BNP takes structured approach

But will others also shun the obligations foncières structure?

BNP Paribas has unveiled a €25 billion covered bond programme backed by a portfolio of prime first-lien mortgages and guaranteed home loans.

“The addition of a covered bond programme to our existing capital markets issuance programmes will allow investors an ever greater opportunity to purchase obligations linked to specific assets originated by BNP Paribas,” says Michel Eydoux, head of ALM and treasury at BNP Paribas.

Although French investors will welcome, at long last, a new domestic name, BNP Paribas has also given the sector a jolt by eschewing the obligations foncières framework. French covered bond issuers have long claimed the primacy of their legal framework over virtually all others.

Crédit Agricole and Société Générale, which are widely thought to be looking at establishing covered bond programmes next year, will now be carefully weighing their options. Crédit Agricole has been looking at this for several years and is probably ahead of SG in the process.

A new twist

This gave a completely new twist to the debate in the marketplace on the worthiness of having a structured approach, using contract law to issue covered bonds, or the traditional method of having a specific covered bond law.

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