The Australian Prudential Regulation Authority amended a securitisation regulation yesterday (Thursday) to allow covered bond issuance, and will released draft prudential standard for covered bonds, APS 121, early next month for a brief consultation period.

Australian legislation gained royal assent on Monday but APRA was charged with completing the covered bond framework with related regulations. Market participants had suggested that these would prove no obstacle to Australian banks launching covered bonds quickly, and yesterday’s news confirms this.

“ADIs are able to issue covered bonds prior to the finalisation of APS 121, but are encouraged to take note of the proposals contained in the discussion paper,” said Charles Littrell, executive general manager, policy, research and statistics, at APRA in a letter to ADIs (Authorised Deposit-taking Institutions).

He said that APS 121 will relate mainly to the capital treatment of covered bonds.

APRA has removed a prohibition on ADIs issuing covered bonds that had been in a securitisation regulation.

“The Australian Prudential Regulation Authority has amended Prudential Standard APS 120 Securitisation to reflect commencement of the Banking Amendment (Covered Bonds) Act 2011,” said David Jacobsen, a partner at law firm Langes+.

National Australia Bank and Commonwealth Bank of Australia could issue the first Australian covered bonds in the coming month, with roadshows planned to start on 31 October and 7 November, respectively. ANZ, Westpac and Macquarie are also said to be close to going ahead with programmes.