FDIC Seeks Comment on Covered Bond Policy

The Federal Deposit Insurance Corp. has adopted and is seeking comment on an interim policy statement that aims to "reduce market uncertainty and the additional costs of U.S. covered bond transactions" while regulators evaluate the benefits and risks of the products. The interim final guidance, which is effective immediately but may be amended later in response to comments, addresses "the availability of expedited access to collateral pledged to certain covered bonds in a receivership or a conservatorship, after the FDIC decides whether to terminate or continue the transaction." Among the conditions the European-style mortgage bonds must meet for the guidance to apply is a provision that they constitute "no more than 4% of an institution¹s total liabilities after issuance." Covered bonds are relatively new to the U.S. mortgage market and have had only two issuers, Washington Mutual and Bank of America.