A proposal for the inception of multi-issuer OBGs sold with Cassa Depositi e Prestiti (CDP) as an anchor investor was discussed by Italy’s ministry for economic development and industry bodies on Friday at a meeting seeking ways to boost mortgage lending.

CDP headquarters, Rome

The idea of such multi-issuer covered bonds was first conceived by the Associazione Nazionale Costruttori Edili (national builders association) at the end of last year, and brought to the official discussions with the Italian government on Friday. Alongside ANCE, representatives of the Italian Banking Association (ABI) and Cassa Depositi Prestiti also joined last week’s meeting.

According to data from the Italian office for national statistics, mortgage origination in the first quarter of 2012 decreased by 49.6% year-on-year.

Antonio Gennari, ANCE vice-director, told The Covered Bond Report that in spite of the crisis, demand for mortgage lending from borrowers has not decreased. According to Gennari, mortgage lending has dropped significantly because banks have found it increasingly difficult to access the capital markets, and their activity has been affected by a lack of medium and long term funding.

The introduction of multi-issuer covered bonds could help small banks enter the OBG market, which is now only available for large issuers, said Gennari.

Under the ANCE proposal, state-controlled CDP could promote the issuance of multi-issuer covered bonds by becoming the main investor in the transactions.

“Multi-issuer bonds would decrease the cost of issuance, and the mediation of the CDP could help small banks to use this instrument and raise long term funding for their mortgage lending,” he said.

But according to a person familiar with Friday’s discussions, the assumption on which the proposal is based – that a lack of funding is affecting mortgage lending more than a decrease in demand – is open to debate.

He also questioned the need for CDP to intervene in the process.

“Again, the assumption is that demand for OBGs is low,” he said. “This may have been the case at the beginning of last year, but recent transactions confirmed the demand for Italian covered bonds is high.”

Italian issuers Intesa Sanpaolo and UniCredit each placed Eu1bn covered bond transactions that attracted Eu3bn and Eu6.5bn of orders, respectively, in January.

Another proposal put forward by ANCE is to tighten the link between OBG issuance and mortgage lending, so that banks issuing OBGs would be requested to use the funding raised to refinance mortgages.

However, Gennari said that no amendment to the OBG law has been proposed yet, and legislative discussions are more likely to take place after a general election on 24-25 February.

“At this stage we are highlighting what is the problem and proposing solutions,” he said. “Further consultation with the other institutions involved would be needed to put forward any legislative proposal.”

The ministry for economic development said it will not comment on the issue at this stage but confirmed that those proposals have been put forward, and that it will release a statement in due course. CDP also declined to comment.