A group of the most active lead managers in the covered bond market have thrown their weight behind the European Covered Bond Council’s labelling initiative by agreeing to set off issuers’ initial label costs against the fees they receive for arranging inaugural labelled benchmarks.

The initiative – first reported in The Covered Bond Report on 21 May (see here) – comes alongside discounted fees being charged by the ECBC labelling body for issuers who sign up by 30 September.

“We welcome the ECBC’s Covered Bond Label initiative and believe that it is a positive step forward for the development of the covered bond market,” said the banks in a joint statement. “In this regard we note the comments by representatives of the European Central Bank in support of the Label at the recent ECBC Plenary meeting in London.”

Francesco Papadia

At that meeting on 29 March, ECB director general for market operations Francesco Papadia said that he “very highly” appreciates the efforts being made on the labelling initiative (see here for more).

Luca Bertalot, head of the European Covered Bond Council, welcomed the investment banks’ plan.

“The announcement of the active support for the covered bond label by of one of the industry’s leading stakeholder groups is a very positive development,” he said, “and serves to demonstrate the confidence and commitment that the industry has to make the new label a success.”

The investment banks have proposed that on the first benchmark covered bond of an issuer under the label the total underwriting fee be reduced by the cost the issuer has paid to obtain the label, including the initial registration fee and any applicable volume related fee. The amount deducted will be taken from the individual fees payable to each lead manager pro rata among the investment banks that are participating in the initiative.

“All investment banks active in the covered bond market are welcome to join this initiative,” said the banks.