January 7, 2013

Monetary Authority of Singapore (MAS) came out with a consultation paper on guidelines for issue of covered bonds by the banks of Singapore. The paper titled "Covered Bonds Issuance by Banks Incorporated in Singapore" was issued in March last year. Since then the paper was put up for public and industry comments for almost a year.

DBS bank is already preparing and pressing for structural reforms to issue covered bonds once the regulations are approved and are in line. DBS working closely with Deutsche Bank and Barclays are all set to be the first to issue the first covered bonds of Singapore. DBS is likely to face tough competition from the Australian banks which are pricing their covered bonds at a cheaper rate. Thus, penetrating the market with a tight pricing policy seems to the primary objective of DBS. The currency denomination is yet to be determined for the issue. Europe is speculated to be the favorable buyers of the covered bonds with their vast experience in this area and familiarity of the structure.

Singapore banks are eagerly waiting for the final guidelines to be approved. Due to their little experience in securitisation, structural standardization of the loans to be used as collaterals need to paid heed with a constant supervision.

Reported by: Piyush Sinha