UniCredit Ţiriac Bank will consider covered bond issuance when Romania has updated its framework, which a working group is making strong progress towards, according to one of its members.

Radu Rasvan

UniCredit Ţiriac CEO Radu Rasvan discussed the plans of the Romanian subsidiary of UniCredit at a press conference last week.

“We are considering covered bond issues, the legislation is still under discussion,” he said. “We are currently verifying and discussing to what extent the legislation allows it and if the costs justify such a measure.

“We want to do this but we are not desperate to,” he added. “We will do it at the right moment and if the market allows it.”

Romania has had a mortgage bond law in place since March 2006, but there has been no issuance because, bankers in the country say, it is not fully aligned with international standards, and there was a lack of interest because of alternative investment opportunities for local funds.

A working group was established by market participants in the first half of 2010 to improve the legal framework for issuing covered bonds, after an overhauled pension system paved the way for private pension funds in the jurisdiction to start investing more.

Irina Neacsu, head of debt capital market at Banca Comercială Română, who sits on the working group, told The Covered Bond Report that UniCredit Ţiriac’s interest came as no surprise.

“The local banking system is willing to have this funding tool in place, as there is a critical mass of mortgage loans and public sector loans in Romania that could be utilised for covered bond funding,” she said.

She said the Romanian Banking Association is spearheading the movement, arranging rounds of discussions with the authorities, and had made strong moves toward legislation. However, she could not estimate when Romania would have a law in place, adding that once primary legislation is approved, secondary regulations will also have to be agreed with authorities.