CBA keen on issuing $30bn covered bonds

Study says Australian banks have the capacity to borrow up to A$130 billion in covered bonds over the coming years.

Commonwealth Bank of Australia on Friday mandated four banks to manage a planned issuance of $30 billion in covered bonds for the Australian market.

The offering, which will be run by CBA, Citibank, HSBC and Westpac, is expected to begin on Monday, subject to market conditions.

The issuance of covered bonds in Australia is in its infancy after lawmakers in Canberra only late last year changed legislation that had stipulated depositors must rank above all other creditors, a rule which in effect barred the issue of covered bonds.

Analysis by the government estimated that Australian banks have the capacity to borrow up to A$130 billion in covered bonds over the coming years, before they hit a statutory limit of 8.0% of their assets. In the initial covered bond deals from Australia's banks, all have been issued in overseas markets to largely foreign investors.

View the full story in Nasdaq.