David Power and Ben Colice accepting the award from Bill Thornhill.

2012 was a noteworthy year for covered bonds in the U.S. Almost $44 billion of covered bonds were issued in the U.S. market and we ended the year with about $110 billion of covered bonds outstanding. The market also saw a number of notable firsts. The first SEC registered covered bond was offered by Royal Bank of Canada in September (prospectus available here). The $2.5 billion 5 year offering was extremely well received, attracting investors who were looking at covered bonds for the first time. The Cover awarded RBC its Editors Award for Most Innovative Deal of the Year at its annual awards dinner in Munich. The market also saw the first 7 year covered bonds, from SpareBank, and the first 10 year covered bonds, from ING Bank, significantly extending the curve.

The Canadian banks were the most active issuers in the market in 2012, even though by late June all but RBC were unable to issue further covered bonds because of new legislation. The adoption of covered bond legislation by Canada in June was a significant development. Canada Mortgage and Housing Corporation (CMHC) was appointed as covered bond regulator and published its new regulations for registering issuers and covered bond programs in December. In a fundamental change for all of the banks (other than RBC), CMHC insured mortgage loans will no longer be eligible assets in covered bond programs. Accordingly, all of the Canadian banks (other then RBC) were required to establish new covered bond programs that use uninsured mortgage loans. All of the banks (including RBC) must register their programs with CMHC under the new regulations before issuing further covered bonds.