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Canada broadens global reach with covered bond law

Dec 26 2012 Thomson Reuters Business Law Currents

Canada's covered bond market will be open to a broader range of international investors in 2013 after sweeping changes to the legal framework for the sale of those securities. The long-awaited legislation, which offers investors more certainty about the cover pool in the event of a default, is expected to give the sector a huge boost in demand. "More covered bond investors, particularly in Asia, the Middle East, and Europe, can now move forward with Canadian covered bonds for investment," one banker said. "These significant investors were precluded previously from purchasing covered bonds without a legal framework." The Canada Mortgage and Housing Corporation (CMHC) this week announced the details of the framework, under which only banks with registered covered bond programmes can sell covered bonds. Moody's said that investors will benefit from the new rules requiring issuers to detail cover pool data, undergo tests to protect against credit risks and employ an independent

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