A Dutch covered bond issuers’ association set up earlier this year has been working with the country’s central bank on ways to harmonise Dutch programmes and to improve the efficiency of the funding instrument given prevailing high overcollateralisation levels, the group’s president told The Covered Bond Report.

The Dutch Association of Covered Bond Issuers (DACB) began as a committee managed by the Dutch Banking Association (NVB), and was formally established in January, according to Jac Besuijen, president of DACB.

“Such a structure is very common across Europe, and provides for more focus, more visibility and more commitment from the sector,” he said.

DACB has four members: ABN Amro, ING Bank, NIBC and SNS Bank. Achmea Mortgage Bank, another Dutch issuer, is not a full member because its covered bonds are not registered with the country’s central bank, according to Besuijen, but it is nonetheless heavily involved with the association.

Dutch covered bond legislation allows for two types of covered bonds to be issued: those that meet only the UCITS 22(4) criteria and those that also fulfil CRD requirements, in particular relating to maximum loan-to-value ratios.

Besuijen said that because of the covered bond association’s background, its small size, and the NVB having more resources, the DACB has chosen to align itself closely with the NVB.

The issuer association meets every six weeks and is set up in a similar way to the European Covered Bond Council (ECBC), added Besuijen, in that it has working groups dedicated to different subject areas – technical issues, statistics and data, and legislation.

Enhanced transparency, more harmonisation and greater efficiency of the covered bond product are key topics on which the DACB has been focussing, said Besuijen.

For example, the association has been working with the country’s central bank, De Nederlandsche Bank (DNB), on new policies that are targeted for introduction next year, he said, with one of the goals being harmonisation of procedures and definitions, such as the methodology used for indexation of housing prices.

The “more important” topic of overcollateralisation levels for Dutch covered bonds is also on the agenda, he added.

“Overcollateralisation levels are fairly high, too high in our opinion,” he said, adding that this was the result of rating agencies “severely punishing” asset-liability mismatches in Dutch covered bond programmes.

“We are exploring different alternatives to come up with better structures for our covered bond programmes to limit the liquidity risk,” he said.

Improving transparency has also been an important topic under discussion with the DNB in recent weeks, according to Besuijen, with Dutch issuers likely to go beyond the minimum disclosure standards set out in a template from the Covered Bond Investor Council (CBIC).

“Although RMBS is obviously an entirely different product, we have the advantage of being a securitisation market and being used to providing detailed data,” said Besuijen. “This is not so much an issue for us, although there is still room for improvement.”

The association does not yet have a website, but expects to launch one later this year, at the address www.dacb.nl, he added, with independent research on the Dutch mortgage market among information to be featured on the site.