Government to implement covered bonds regime in March 2008

Economic Secretary to the Treasury and City Minister Kitty Ussher today announced the intention to implement the new UK covered bonds regime on 6 March 2008. This revised timetable will allow for further engagement with stakeholders following earlier consultation.

Kitty Ussher said:

"The new covered bonds regime will bring huge benefits to UK issuers and investors. We have been working closely with stakeholders to ensure that the proposed legislation maintains and facilitates the further growth of a robust, high-quality market. It is important that we take adequate time to consider the range of responses to consultation that we have received, many of which reflect changed considerations arising out of the summer's events."

HM Treasury and the Financial Services Authority (FSA) have been considering proposals for the development of a UK covered bonds regime compliant with the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive. Compliance will create a level-playing field for UK covered bonds in the EU and enable UK issuers to access the larger investor base of the €1.8 trillion European covered bonds market.

Proposals for a principles-based and outcomes-focused legislative framework were formally launched in July 2007, and consultation on the draft regulations closed last month, with a view to implementing legislation in January 2008.

Many consultation responses were informed by market events over the summer and raised a number of new issues for consideration. Changing the implementation date will allow the Treasury and the FSA to work closely with relevant stakeholders to ensure that the UK covered bond regime fully meets the needs of industry and investors.

A summary of responses and revised Regulation will be published for comment on the Treasury and FSA websites in January 2008.

Notes to editors

1. A covered bond is a class of bond issued by banks and backed by certain types of financial assets, generally mortgages or public sector loans. The interest on the bond and the repayment of the principal is secured by the assets backing the bond. Covered bonds are structured to be high quality debt securities and have high credit ratings. A recognised covered bonds regulatory framework will provide additional safety features for investors.

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