Covered with Maple: DBRS Comments on Canadian Covered Bond Programs Guide

DBRS notes that on December 17, 2012, Canada Mortgage and Housing Corporation (CMHC) released the Canadian Registered Covered Bond Programs Guide (the Guide), as mandated by Canadian covered bond legislation. The Guide sets out, among other things, the terms of the Canadian covered bond registry and continuous disclosure requirements for registered Canadian covered bond programs. DBRS views the Guide as positive, as the implementation of the Guide and the Canadian covered bond registry is expected to increase the global investor base for Canadian covered bonds and improve the liquidity of Canadian covered bonds globally. DBRS also considers that the features of the Guide will help to achieve standardization and enhance transparency amongst the Canadian covered bond programs, which DBRS views as beneficial to covered bond investors.

Upon an initial review of the Guide, DBRS expects that the current Canadian covered bond issuers will either amend their existing respective programs or create new programs to comply with the Guide. Given the substantial requirements prescribed in the Guide, DBRS does not expect any new Canadian covered bond issuances over the next few months while the issuers are implementing the changes to existing programs or establishing new programs. DBRS will not assign any final ratings to any proposed new issuances until DBRS has received confirmation that the relevant issuer, the program and series have been registered in accordance with the Guide.

DBRS understands that the existing Canadian covered bond issuances will be grandfathered and are not subject to the Guide and the Canadian covered bond legislation. As such, there is no impact on the current AAA ratings by DBRS on the outstanding Canadian covered bonds following the publication of the Guide.

Note:
The applicable methodology is Rating Canadian Covered Bonds (March 2011), which can be found on our website under Methodologies.