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Covered bonds: Call for covered bond calm in face of delay

The problem is with time rather than the legislation or its implementation, say analysts.

The UK Treasury has delayed the implementation of the UK’s recognized covered bond law until March 6 from its originally planned date at the beginning of January. Although some have reasoned that this is because of last-minute objections raised by the UK Investment Management Association (IMA) concerning, among other things, insolvency procedures, the actual reason is far more administrative. "Industry worked closely with [the UK Treasury] and the FSA on the development of the proposed covered bonds regime," says Rob Robinson, covered bond analyst at Merrill Lynch. "However, many of the consultation responses were informed by market events over the summer, which raised new issues for consideration. It was made apparent to industry by the authorities upon receipt of these responses that the previous timetable would not be attainable. Fundamentally there is nothing wrong with the legislation or with the approach being taken towards its implementation."

If one of the larger banking institutions and a small-time outfit both commented or made requests for information, the FSA and the Treasury would have to give each an equal weighting. Although this is a fair and decent way to go about things, it does require a lot of time, especially considering the sheer volume of feedback received by the authorities, Robinson says.

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