The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Covered bonds: Keep the champagne on ice in Italy

CHAMPAGNE CORKS WERE popping in Lisbon to herald the smooth passage of Portugal’s covered bond legislation. So Europe has yet another covered bond market, news that will have been greeted with a certain amount of resignation in Italy by both banks and regulators. It all looks so easy, but somehow Italy has made it look very, very difficult.

CHAMPAGNE CORKS WERE popping in Lisbon on October 2 to herald the smooth passage of Portugal’s covered bond legislation.

The country certainly took an unusual approach right from the start when it decided to kick off the process by passing a law that applies to one issuer alone, Cassa Depositi e Prestiti. This law (article 5/18 of Law 296) was passed in September 2003 but it was not until March 2005 that CDP’s debut issue was launched – and panned. Widely criticized as late and far too aggressively priced for its 20% risk weighting, the debut deal from CDP’s €20 billion covered bond programme managed just €1 billion in size and was far from the benchmark that the market had been hoping for.

The issuer’s reputation was, however, subsequently salvaged with a successful €3 billion seven-year issue in October 2005 and a €2 billion three-year trade in February this year.

It was, by any measure, not a great start. But CDP’s rocky road to covered bond issuance was just a foretaste of what was to come for the passage of wider covered bond legislation in Italy. Potential legislation has been under discussion for years, but a straightforward Pfandbrief-style market was always unlikely because of the nature of the underlyings: most loan agreements in Italy include a negative pledge, which means that the borrower or issuer cannot grant security over its assets.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree