Australia to permit banks to issue covered bonds
2011-09-15 11:11:10
Australia's Treasurer Wayne Swan on Thursday introduced a legislation in the parliament allowing financial companies to issue covered bonds for the first time.
The Treasury estimates the new framework will permit banks to raise up to A$130 billion in the years ahead. Swan said they will restrict the covered bond issuance at 8 percent of the bank's assets.
Domestic institutions were banned from issuing covered bonds, while foreign banks sell covered notes in Australia. Covered bonds are highly secured, as they are backed by assets that remain on the balance sheets.
The latest move will help banks to reduce their funding cost.