A cross-border covered bond could come to market in Latin America in 2012, according to Moody’s, with regulators in Mexico working on regulation to allow issuance of the product by the country’s banks, even if funding pressures are said to be minimal.

Moody’s discussed covered bond issuance prospects in a 2012 outlook piece on securitisation in Latin America, and Rene Ibarra, vice president at the rating agency, told The Covered Bond Report that Moody’s believes that covered bond regulations could be released in 2012.

“We are waiting for the regulator to release a final document on covered bond regulations,” he said. “There are no transactions on the horizon to our knowledge, with Mexican banks highly liquid and well capitalised, but the regulator wants to be ready.”

According to Moody’s research, the envisaged regulations would allow issuance backed by mortgages and infrastructure projects.

Ibarra said that regulatory interest in covered bonds has been fuelled in part by negative experience with residential mortgage backed securitisation in the 2008 crisis, with the regulator keen to develop a more secure funding instrument for banks in particular.

Moody’s will look to meet with the Mexican banking and securities regulator, Comisión Nacional Bancaria y de Valores, to find out more about its plans and thoughts on forthcoming regulation of the structured finance market, according to Ibarra.