CEBS says covered bonds can be considered in liquidity buffers

12/15/2009 | EuroWeek

The Committee of European Banking Supervisors released guidelines that say covered bonds can be included in instruments used for liquidity buffers at banks. Market participants expect the move to boost the covered-bond market. "This is a massive vote of confidence in the market," said Richard Kemmish, Credit Suisse's head of covered-bond origination in London. "The amount of liquidity that banks have to put on because of these proposals will be substantial, and the ability to do this in covered bonds rather than just govvies is vital for bank profitability -- from a pure cost-of-carry point of view."

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