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: Jim Hamilton's World of Securities Regulation

By Jim Hamilton

House-Senate Conference Agrees to Amendment Facilitating US Covered Bonds Market

House-Senate conferees accepted an amendment sponsored by Rep. Scott Garrett that would facilitate a covered bonds market in the U.S. to add liquidity and certainty to the capital markets. The amendment, which is part of the securities subtitle of the legislation, establishes regulatory oversight of covered bond programs, includes provisions for default and insolvency of covered bond issuers and subjects covered bonds to appropriate securities regulations by federal regulators. The amendment mirrors covered bonds legislation introduced earlier by Rep.Garrett, HR 2896, with support from Rep. Paul E. Kanjorski and Financial Services Committee Ranking Member Spencer Bachus as leading cosponsors.

Covered bond are non-deposit recourse debt obligation of an insured depository institution with at least a one-year maturity that is secured by specifically identified assets which are performing in accordance with the terms of the contracts which created the assets.

Covered bonds have been used in Europe to help provide additional funding options for the issuing institutions and are a major source of liquidity for many European nations? mortgage markets. The Garrett Amendment is a thorough framework that seeks to provide the same benefits to the U.S. market. According to Rep. Kanjorski, Chairman of the House Financial Services Subcommittee on Capital Markets, covered bonds will keep skin-in-the-game for securities.

Full post as published by Jim Hamilton's World of Securities Regulation on June 22, 2010 (boomark / email).