The long-awaited legislative framework for UK covered bonds was implemented on March 6 2008. The UK government has high hopes for the new regime, and has described it as setting a gold standard for UK covered bonds. Some would argue that the structured covered bonds issued by UK originators to date need little improvement – such bonds are recognised as attractive and secure products in their own right and have inspired similar structured products in various other jurisdictions – but market participants across the board welcome the new regime. It enables UK covered bonds to benefit from higher prudential investment limits and preferential risk weighting. As a result, UK covered bonds are about to become even more attractive to a wider range of investors. In the eyes of many, this takes the bonds from good to gold.
A level playing field
Before the implementation of the new framework, UK covered bonds were not...