A debut covered bond for TSB Bank looks closer after the UK financial institution on Friday registered a new programme and received a provisional Aaa covered bond rating from Moody’s for an expected £500m issue.

TSB, which last May confirmed its intention to issue covered bonds, on Friday published a prospectus for a £5bn programme.

“TSB Bank plc has established a £5bn Global Covered Bond Programme, regulated by the FCA,” a TSB spokesperson told The CBR. “This programme gives us the opportunity to further diversify our funding, reflecting our prudent approach to managing the bank’s finances, and any covered bonds issued will be backed by a pool of mortgage loans.”

The spokesperson declined to comment on the timing of a first issue.

On Friday afternoon, Moody’s assigned a provisional Aaa rating to the covered bonds to be issued by TSB.

The rating agency’s analysis considered factors including, assuming an issuance size of £500m (Eu589m): overcollateralisation in the cover pool of approximately 30.4% of which 12.4% is provided on a committed basis; a collateral score of 5% for the cover pool (2.8% excluding systemic risk); and exposure to market risk of 10.3%.

The Timely Payment Indicator (TPI) assigned to the programme is “probable”, and the TPI framework does not constrain the rating. Moody’s rates TSB Bank A2.

Lloyds Bank is the arranger of the programme and Banco de Sabadell and Lloyds are dealers.

TSB was taken over by Spain’s Sabadell Group in June 2015, having previously been a member of the Lloyds Banking Group. Lloyds divested the bank under European Commission state aid rules with a listing in 2014.

Lloyds is the only UK issuer to have sold a sterling-denominated benchmark covered bond this year, printing a £1bn three year floating rate note at 32bp over three month Libor on 9 January. Including Lloyds’ deal, £2.675bn of sterling benchmarks have been sold so far in 2017, the rest coming from issuers in Canada, Australia and Germany.