The UK Financial Services Authority and HM Treasury today (Wednesday) launched a review of the UK covered bond framework, which they said aims to make UK covered bonds more attractive to investors and to allow UK issuers to compete on a level playing field.

In a statement, the authorities said that the joint review would also provide an update on how the UK is engaging with other countries on other issues related to covered bonds.

“A key issue of current discussion is the scope of proposed ‘bail-in’ powers, which would allow the authorities to impose losses on the creditors of a failing financial institution,” said the FSA. “The UK believes that in the exercise of any bail-in powers, secured creditors’ rights to collateral should not be over-ridden, and that the claims of covered bond holders in relation to the supporting asset pool should not be affected.”

Moves proposed under the review are:

• Introducing consistent standards of investor reporting
• Requiring issuers to maintain a fixed minimum level of overcollateralisation
• Designating a regulated covered bond programme as backed by only a single asset type in the legislation
• Excluding securitisations as eligible assets for regulated covered bond asset pools
• Creating a form role of “asset pool monitor” in the legislation
• Changes to regulatory reporting

Responses to the consultation are due by 1 July.