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CAPITAL MARKETS

Covered bonds: UBS launches covered bond programme

The first Swiss issuer of jumbos; Broader investor base sought

UBS has announced a covered bond programme that will give international investors access to high-quality mortgage assets, originated in Switzerland, for the first time. UBS will issue its covered bonds via its London branch. In doing so the Swiss bank has shunned the long-established national covered bond framework.

"UBS, like other banks, has continued interest in diversifying our source of term funding. The covered bond market provides an ideal way for this and enables us to broaden our investor base or deepen existing relationships," says Armin Peter, head of covered bond business and syndicate at UBS.

Efficiency



Under Swiss law, cantonal banks and commercial institutions can only issue covered bonds using Pfandbrief banks, which act as pooling agents. While this system is an efficient structure from a funding perspective, it does not allow originators to manage their financing independently because it is not a single-originator structure. The nature of the framework also prohibits the issuance of jumbo-sized transactions.



UBS bankers say they have been working on this programme for some time. The cost of long-term unsecured financing for financial institutions has been increasing following the crisis and has made the issuance of covered bonds more attractive than in the past.





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