The Polish Banking Association and other Polish institutions are lobbying for a change in legislation regarding the transfer of mortgages that they say would lead to increased covered bond issuance. Meanwhile, public sector covered bonds issued by BRE Bank Hipoteczny were upgraded yesterday (Monday).

BRE Bank branch

Polish laws on the transfer of mortgages between institutions make the process long and arduous, according to Piotr Cyburt, chief executive officer at BRE Bank Hipoteczny and a member of the Polish Banking Association (ZBP).

“A change in this law would mean an increase in covered bond issuance,” he said. “It is not possible to transfer, say 10,000 mortgages, from one institution to another because you have to inscribe individual loans in the court.”

Cyburt said that this process is costly and inefficient, taking six months to a year, making it highly impractical.

“We have to work out a system in Poland that makes the transfer possible in a short time without creating any negative consequences for the safety of the collateral,” he said. “We will be lobbying for this change in the mortgage law.

“I have an impression that both the new government and the new supervision authorities will be keen to solve these issues as soon as possible.”

A new Polish government led by prime minister Donald Tusk was elected in October.

BRE’s public sector covered bonds were upgraded from Baa1 to A3 by Moody’s because of material levels of voluntary overcollateralisation supporting the covered bond programme. The overcollateralisation is maintained at a level of 25.3%, compared to an amount of 10% which is consistent with an A3 rating.

Cyburt said the 25.3% overcollateralisation on the programme had been installed for about a year and a half, but that Moody’s had only recently decided to view this overcollateralisation as a permanent fixture.

“They now know there is no danger the overcollateralisation will be reduced to nothing,” he said.

“We have declared we will keep 6% overcollateralisation on all our public sector covered bonds,” he added.

BRE’s covered bonds have been assigned a Timely Payment Indicator (TPI) of “very improbable” and have a TPI leeway of 0 notches, meaning the covered bonds could be downgraded as a result of a TPI cap once the issuer is downgraded below Baa3, all other variables being equal.