ANZ sells bonds into volatile European market
(18 October 2011 – New Zealand) ANZ’s New Zealand arm has managed to sell €500 million ($A670 million) worth of bonds mostly to large European investors, even as banks there remain on the nose given the region's grinding financial crisis.
For the first time ANZ used an instrument called a covered bond to raise the funds - these are bonds that are designed to give investors a claim on the assets of the bank if it runs into difficulty.
In Australia, new laws permitting local banks to sell covered bonds were approved by Parliament last week, although it will still be some months before banks are expected to take advantage of the new rules.
'All Australian banks, credit unions and building societies, and ultimately their customers, will benefit from the issuance of covered bonds,' Treasurer Wayne Swan said.
Until now depositors had the rights to all of the assets of a failing bank. However, the new Australian rules permit banks to issue the equivalent of 8 percent of their assets in covered bonds, potentially resulting in banks issuing up to A$160 billion of such bonds.
In New Zealand the limit on covered bonds is slightly higher at 10 percent. In ANZ's issue the bonds were backed by low-risk New Zealand home loans. Regulators across the Tasman last year gave the go ahead for banks there to sell covered bonds. Both National Australia Bank (NAB) and Westpac's New Zealand arms have already tested the market.
ANZ's New Zealand boss, David Hisco, said yesterday the covered bond helped in the jumpy market, saying there was more ''rigour'' around them compared with a conventional issue.
''This is ANZ New Zealand's first covered bond; we got it done reasonably quickly. I thought that was quite promising given the volatility in the market,'' he said.
In Australia, new laws permitting local banks to sell covered bonds were approved by Parliament last week, although it will still be some months before banks are expected to take advantage of the new rules.
'All Australian banks, credit unions and building societies, and ultimately their customers, will benefit from the issuance of covered bonds,' Treasurer Wayne Swan said.
Until now depositors had the rights to all of the assets of a failing bank. However, the new Australian rules permit banks to issue the equivalent of 8 percent of their assets in covered bonds, potentially resulting in banks issuing up to A$160 billion of such bonds.
In New Zealand the limit on covered bonds is slightly higher at 10 percent. In ANZ's issue the bonds were backed by low-risk New Zealand home loans. Regulators across the Tasman last year gave the go ahead for banks there to sell covered bonds. Both National Australia Bank (NAB) and Westpac's New Zealand arms have already tested the market.
ANZ's New Zealand boss, David Hisco, said yesterday the covered bond helped in the jumpy market, saying there was more ''rigour'' around them compared with a conventional issue.
''This is ANZ New Zealand's first covered bond; we got it done reasonably quickly. I thought that was quite promising given the volatility in the market,'' he said.
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