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Covered bonds

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Published by William Webster

Covered bonds offer both banks and building societies the opportunity to raise much needed long term liquidity at a cost that is lower than that of senior debt. This is because for the investor there is a ring fenced pool of mortgage collateral and this provides enhanced security should the issuer default. It is therefore no surprise that regulators in many countries are keen to encourage covered bond issuance in order to resolve the funding gap that many banks have in their balance sheets.

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