Legislation, quick

Author: | Published: 1 Dec 2009

Nicholas Pettifer
Americas editor

A likely amendment to the Financial Stability Improvement Act should encourage covered bonds in the US. If passed, the rules will offer similar features to European covered bonds legislation.

Congressman Scott Garrett detailed an amendment to the Act on November 18. Despite the fact that he immediately withdrew it, there are encouraging signs that it will pass and the plans have been well received. "The amendment is really quite good," said Jerry Marlatt, structured finance partner at Morrison & Foerster. "In some ways it is very similar to much of the legislation in Europe where, if the bank is insolvent, the protected pool of assets is set aside."

At the moment, the pool of assets in US covered bonds would only be protected by an artificially created contract structure, the enforceability of which is questionable.

Marlatt also pointed out that the Secretary of the Treasury would be the...