Ahead of the planned launch of its first benchmark OBG in three years, BPER has become the first issuer to disclose covered bond pool data via European DataWarehouse (ED), against the backdrop of greater disclosure being required by the ECB via rating agencies.

ED announced on 30 January that the Italian issuer has used its software platform EDwin to share data relating to a covered bond, BPER OBG1.

The EDwin platform was developed to collate ABS deal, bond and loan-level information into a single, centralised database. It enables the upload and download of such information by users, including investors.

“Improving transparency for investors in the European financial markets has been the foundation and mandate for ED from its inception,” said Christian Thun, CEO of ED. “With this in mind, I am delighted and honoured that BPER has chosen ED for the publication of the relevant information of its covered bond.

“With this decision BPER is setting a new benchmark in covered bond transparency supporting the transmission of information to rating agencies and other relevant parties.”

Marco Biale, head of structured finance at BPER Banca, said the issuer decided to use the platform for its covered bonds to give itself “a wider window” for marketing a new public covered bond issuance that will take place this year.

“We are in Italy, a peripheral country, and as for BPER Banca ourselves, we could be called a second tier bank,” he told The CBR. “We are the fifth bank in the Italian banking system ranking, so we need this kind of instrument to provide support to our brand, to our name, to our reputation.”

BPER joined the covered bond market in 2011, but issued its last benchmark in July 2015. Biale said the issuer has been absent from the market because it chose instead to use TLTRO funding.

The other reason for its latest move, Biale said, is that BPER Banca had already used an ED template for sharing granular loan level data for its ABS, having been required to provide quarterly monitoring reports on its portfolio.

In covered bonds, as of 1 July, rating agencies have been required to meet new reporting standards if their covered bond ratings are to be accepted by the ECB for repo collateral purposes – including the publication of quarterly monitoring reports.

“We reckon that the same process established years ago for ABS could also be easily managed for covered bonds in order to let investors have full access and confidence in the underlying credit portfolio and its quality,” said Roberto Ferrari, BPER’s CFO. “In this regard the ECB RMBS template is the most favourable market standard to provide detailed information.”

Biale noted that the ECB requirement applies to rating agencies and not directly to the issuer.

“And, unfortunately, every rating agency is used to working with different types of reporting and templates and requirements,” he said. “So, in our case, we realised that for the ABS – where we have been the originator of the reports for a long time and for many different transactions – we already had something that worked, with a standard and an IT system complying with an ED template.”

Biale said BPER has held conversations with Moody’s – which rates BPER’s covered bonds – about using the ED template to provide the required information for the quarterly monitoring reports, through the rating agency.

“That could be easier from our point of view, and we believe would also be easier for the rating agency and at the same time could be transparent for all investors, because they can have plenty of information and in the same standard and the same template they use to consider our ABS,” he said. “We have a very strong hope that Moody’s will decide to take this same standard for its own monitoring and to produce what the ECB is requiring.

Biale added that BPER has also spoken with other Italian issuers – “maybe some bigger banks” – who are also interested in this approach.

“I can understand it is not something we can force all the players all over Europe to do this,” he said. “But from our point of view, we know we are a peripheral country, we know we are weaker than some other core European issuers, but of course the covered bond is the best product Italy has in this very moment.

“Why not make it stronger?”

ED’s Thun told The CBR that it was “a pleasant surprise” that BPER requested to use the EDwin platform for its covered bonds.

“It shows that ED has made a name for itself in the industry and is a sign of the advent of loan level data reporting,” he said. “It also shows that the perceived strict boundary between covered bonds and ABS is softening a bit.”

The EDwin platform is free to access for institutional investors, and BPER’s covered bond is now listed alongside ABS deals on the platform. Thun noted that no substantial changes were required to the template to allow the deal to be uploaded.

“It is the same technical infrastructure as for ABS,” he said.

Thun said ED is interested in expanding further in the covered bond space and plans to hold a dialogue with issuers about the potential of using the EDwin platform for their covered bonds.

“There is a positive momentum,” he said. “Whether this will eventually lead to a number of uploads and new creations on our platform remains to be seen.”

He noted that this would depend on the reaction of investors and rating agencies to BPER’s move and whether these parties encouraged other issuers to follow.

“But the reaction we have seen on the user side already has been very positive,” he said.

BPER Banca has also held discussions with the European Covered Bond Council (ECBC) about joining the Covered Bond Label, and will do so in the near future, said Biale.