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06 April 2011

UK publishes review of the covered bond market

The Government and the FSA published today a joint review of the UK’s covered bond regulation.

Responses to the joint review should be submitted by Friday July 1 2011.

Covered bonds are an important source of funding for banks and building societies that can complement unsecured funding and securitisation.

The review proposes a number of measures that seek to build upon the UK’s existing covered bond regime. These measures aim to ensure that the UK covered bond market is better aligned with markets in other countries, enabling UK issuers of covered bonds to compete on a more level playing field.

The review also provides an update on the UK's engagement with international partners on broader policies concerning covered bonds. In particular, the UK believes that in the exercise of any future ‘bail-in’ powers, secured creditors’ rights to collateral should not be over-ridden.

Mark Hoban, Financial Secretary to the Treasury, said:

“Making sure banks and building societies lend to families and businesses is vital for sustaining the recovery. Today’s review demonstrates the Government’s commitment to supporting the UK’s growing covered bond market. The review will bring out the strengths of the UK’s covered bond regime and help lenders raise the funds they need to lend.”

Notes for Editors

1. The review: Review of the UK's regulatory framework for covered bonds is available on the Treasury website

2. Responses are requested by 1 July, and should be sent to: coveredbondreview@hmtreasury.gsi.gov.uk.

3. Covered bonds are secured bonds issued by banks and building societies and typically backed by mortgages. Lenders issue covered bonds to raise funding.

4. Like many European countries, the UK has a regulated framework for covered bonds. Regulated covered bonds must meet standards set out in legislation and are supervised by the FSA.

5. Covered bonds are an important source of stable, long-term funding for banks and building societies. They can complement unsecured funding and securitisation to help banks develop a diversified, resilient funding model.

6. The review will highlight the quality of the UK regime with the aim of increasing the appeal of UK covered bonds to investors.

Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to public.enquiries@hm-treasury.gov.uk

This Press Release and other Treasury publications are available on the HM Treasury website hm-treasury.gov.uk

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