An update to Canada’s covered bond framework that introduced a new OC requirement was made to better align Canadian rules with global best practices, CMHC’s Lily Shum told an ECBC plenary last week, while next spring’s plenary in Vancouver was billed as a chance to see a different side of the market.

As part of a 2017 update to the Canadian Registered Covered Bond Programs Guide in June, Canada Mortgage & Housing Corporation (CMHC) introduced the new regulatory minimum OC requirement of 103%.

Previously, the Canadian framework – which is administered by CMHC – required issuers to establish contractual minimum and maximum OC levels, or a ratio of covered bond collateral to covered bonds outstanding by adopting a minimum and maximum value for an asset percentage.

“We think that this legal enhancement is aligned with global best practices, and also facilitates better comparability between issuers’ programmes,” said Lily Shum, covered bond specialist at CMHC (pictured), speaking at a European Covered Bond Council (ECBC) plenary in Barcelona on Wednesday, where EU harmonisation and transparency were key items on the agenda.

In advice to issuers, CMHC said the nominal 103% regulatory OC minimum is aligned with the OC requirements of certain other covered bond jurisdictions and, it said, “supports the prospect for achieving common global standards, should a harmonised covered bond framework develop”.

The new requirement will take effect on 1 January 2018, although CMHC noted that the current level of OC in all Canadian registered covered bond programmes meets or exceeds the minimum level. Issuers will be required to disclose the level of OC in their cover pools monthly.

Shum noted that four of the seven established Canadian covered bond issuers had joined the Covered Bond Label this year.

“We think that the Label complements our framework, which has focussed a lot on transparency and disclosure,” she added.

The next ECBC plenary will be held in Vancouver on 18 April and Wojciech Zielonka, CFO and senior vice president, capital markets, CMHC, noted the plenary will be the first to be held outside Europe.

“So it is very meaningful, in that it is an indication of the success of the work that Luca [Bertalot, EMF-ECBC secretary general] and the ECBC secretariat have done in terms of making this a truly global product,” he said.

Describing Canada as a bridge between Asia, North America and Europe, Zielonka said the next plenary will be a great opportunity for issuers and investors to see “a different side” of the covered bond market.

“We look forward to seeing everyone in Vancouver.”