The ICMA Covered Bond Investor Council today (Thursday) released data lists detailing information it believes issuers should provide to investors, as it pushes for greater transparency in the covered bond market, an issue that has been an increasing focus of the buy-side as well as regulators.

The voluntary transparency standards set out three categories of information the CBIC expects from issuers: general issuer data; cover pool data; and explanations as to how key concepts are defined.

“It’s not just new covered bond investors who are raising questions about transparency,” said Andreas Denger, senior portfolio manager at MEAG Munich Ergo Asset Management. “Traditional buyers also have also increasing needs for comparable and standardised information on the issuer, collateral pool characteristics and key definitions.

“We believe that most of this information can be provided relatively easily by all issuers.”

Andreas Denger, MEAG

The publication of the proposed transparency standards begins a consultation period that will close on 30 June, and the CBIC is aiming to have the standards finalised in September.

“The CBIC believes that transparency standards are a milestone in the roadmap towards a better transparency regime in Europe,” it said.

The proposals are the fruit of work by a CBIC working group that has sought to identify the key information covered bond investors require, said the Council, which operates under the auspices of the International Capital Market Association.

“It is expected that the information required would be available on a regular basis (e.g. a half yearly update) to meet investors’ transparency and information needs,” said the Council. “Beside the quantitative information provided via a spreadsheet, some qualitative information is requested to explain the figures and make the data more comparable.

“The CBIC believes that issuers should consider these qualitative elements and ensure a certain degree of consistency, most urgently at national level.”

General issuer information required under the proposals includes sections on: balance sheet data; wholesale funding breakdown; customer loans; margin calculations; and the legal status of covered bonds – whether they are repo eligible, and UCITS and CRD compliant.

The cover pool data standards require issuers to detail cover pool composition and eligibility criteria, with a breakdown of the types of assets in the cover pool and allowed as collateral. Some examples are:

• Are construction loans part of the eligible assets?
• Describe the effect of a 15% drop in house prices to the current OC.
• Do the public covered bonds contain a soft or hard bullet structure?

Issuers are then required to explain key concepts underlying the data in the previous two sections. They are required, for example, to describe how NPLs are defined, how LTVs are calculated, and how residential and commercial loans are delineated.

The CBIC said that it hopes national associations will take the data lists into consideration when developing their own national templates. Associations in Germany and Sweden have already developed standardised ways of calculating some of the key concepts in the CBIC’s proposals.

“The CBIC is well aware that not all jurisdictions or issuers will be in a position to provide all of the requested data,” it added. “Nonetheless, the CBIC invites all issuers to be as accurate and comprehensive as possible in filling in the data list.

“Providing consistent data and transparency for their covered bond products should favour issuers and their respective jurisdictions in increasing investors’ confidence in their product. To accommodate the differences between markets and jurisdictions and deviations from the data list which potentially could occur, additional remarks in the data list at the ‘Additional comments’ section could be given.”

We have uploaded the data lists in their Excel format here:

https://news.coveredbondreport.com/wp-content/uploads/2011/04/CBIC_data_list.xls