Category Archives: Canadian CBs

All related to Canadian covered bonds

BNS Files U.S. Prospectus

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BNS initially filed its registration statement for its legislative covered bond program on Form F-3 with the SEC on May 31, 2013. That registration was declared effective on September 9, 2013. However, BNS did not file a prospectus under the registration statement with the SEC until today, August 20, 2014. In the interim, BNS filed a prospectus with the UKLA and offered covered bonds in Europe on March 26, 2014. Now, with the filing of a prospectus with the SEC, BNS is ready to offer covered bonds in the U.S.

Year to date, the U.S. covered bond market has been very quiet. Only two issuers have brought bonds to market for a total of $3 billion: Westpac Banking Corp. on May 14 and Commonwealth Bank of Australia on June 14, both privately placed offerings. So far, no registered covered bonds have been issued in the U.S. in 2014.

Moody’s expects lower predictability of government support for Canadian banks; changes banking system outlook to negative

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On July 8, Moody’s followed up on its June 11 announcement regarding risk related to a “bail-in” regime in Canada with an announcement of the change to “outlook negative” in Global Credit Research.  Additionally, Moody’s notes that “high household indebtedness and elevated housing prices remain key risks to banking system stability in Canada”.  Further, Moody’s states that “growth sought by the banks has led them to diversify into riskier businesses and geographies which dilute their strong domestic credit profiles and represent a growing risk to the Canadian system’s stability”.

Moody’s: Canadian Banks on Outlook Negative

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On June 11, 2014, Moody’s Investors Service changed the outlook of the seven largest Canadian banks from stable to negative and confirmed each of their long-term ratings.  Moody’s stated that the action was taken in response to previously announced plans of the Canadian government to implement a “bail-in” regime for Canada.  In Moody’s view, the balance of risks for senior debt holders and uninsured depositors of Canadian banks “has shifted to the downside.”

This rating action by Moddy’s has not affected the rating of any outstanding covered bonds issued by the banks.  The current long-term ratings of the banks by Moody’s range from Aa3 to Aa1.