Aegon Bank has set up a Eu5bn conditional pass-through covered bond programme and a treasury official at Aegon said that the move comes as the bank’s role in the Dutch group has grown and covered bonds have become a more interesting proposition.

The programme, structured by RBS, is within the Dutch covered bond framework and will be registered with the Dutch Central Bank. It is UCITS-eligible and CRR compliant, according to Aegon.

The covered bonds will be backed by Dutch residential mortgages and the issuer has committed to maintain a minimum overcollateralisation of 10%. Ratings of AAA from Standard & Poor’s and Fitch are expected for the covered bonds – they rate Aegon Bank A+ and A-, respectively.

Covered bonds have been on Aegon’s radar for a while and Ed Beije, senior vice president and co-head of treasury at the Dutch group, said that the greater prominence today of Aegon Bank within the strategy of the overall group and its growth – with, for example, the success of its online bank, Knab – has contributed to the advent of its covered bond programme.

“A covered bond is an attractive instrument and it will diversify our funding tools,” he said. “We aim to come to market with a benchmark.

“We don’t know yet when we will go. We still have a window this year, otherwise it will be early next year – depending on market conditions allowing so, of course.”

The arrival of the conditional pass-through structure – pioneered by the Netherlands’ NIBC and also used by Dutch peer Van Lanschot – has also made covered bonds more attractive, said Beije.

“It is more interesting because the overcollateralisation criteria are more attractive for an issuer than a normal covered bond,” he said. “And we do see a trend that in a couple of years down the road the CPT structure will be the standard and we will see more programmes.”

Aegon will continue to issue RMBS, although Beije noted that whereas Aegon Bank will be issuing covered bonds, issuance off its SAECURE programme is backed by mortgages originated by non-bank entities Aegon Levensverzekering and Aegon Hypotheken.

“The covered bond is relatively more attractive,” added Beije. “We all know that the investor base for covered bonds, because of the favourable regulatory treatment, is much broader than for securitisations.”