...Established Market: It has been four years since the passing of the Banking Amendment (Covered Bonds) Bill 2011 through the Australian parliament, which established a legislative covered bond framework within Australia. The framework allows for programmes to be established by Authorised Deposit-taking Institutions (ADIs) secured against mortgage assets. Six programmes have since been established, with 155 bond issues totalling AUD112bn from five programmes, all secured by residential mortgages, as of December 2015. Excess Over-Collateralisation at Risk: Fitch only gives credit to over-collateralisation (OC) defined via the asset coverage test (ACT) calculated by the issuer and published in investor reports, as the legislation allows the Australian Prudential Regulation Authority (APRA) to direct cover assets that do not secure covered bond liabilities back to the issuing bank. All Australian programmes have a minimum contractual OC level of 5.3%. The legislation stipulates a minimum 3%...
