FDIC concerns spread to foreign covered bonds

Author: Danielle Myles | Published: 31 Jan 2012

The Federal Deposit Insurance Corporation’s (FDIC) depositor protection concerns over covered bonds have been picked up by regulators in other parts of the world, according to panelists at the American Securitization Forum’s 2012 conference (ASF2012) last week.

Proponents of US covered bond legislation have lobbied against the FDIC which says overcollateralisation risks a disproportionate amount of assets being made unavailable to depositors and creditors in a bank’s insolvency.

The FDIC’s views have historically been at odds with the global standard. But this may be changing.

"I think the regulators in Europe are going to start lowering the caps on covered bonds for the same reasons," said panelist James Lockhart III of WL Ross & Co, referring to the strengthening of...