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Westpac all set for 5 billion euros (NZ$8.8 billion) covered bonds programme

Westpac all set for 5 billion euros (NZ$8.8 billion) covered bonds programme

By Gareth Vaughan

Westpac New Zealand has been given the green light to become the second local bank to issue covered bonds with the first issue in a 5 billion euros (NZ$8.8 billion) programme planned for the first quarter of 2011.

“The (Westpac NZ) board has approved our covered bond programme which is a 5 billion euro programme initially,” Westpac’s chief financial officer Richard Jamieson told

Westpac will become just the second New Zealand or Australian bank to issue covered bonds after BNZ launched a NZ$3 billion programme in June, which it is now considering more than doubling.

Covered bonds are senior debt instruments backed by a dedicated group of home loans known as a “cover pool.” So if the issuing bank defaults, the assets in the cover pool are carved off from the issuer’s other assets solely for the benefit of the covered bondholders. The Reserve Bank says it’s comfortable with banks issuing covered bonds worth up to 10% of their total assets, based on the value of assets securitised.

Westpac's total assets stood at NZ$55.2 billion at September 30, meaning currently it could issue covered bonds worth up to NZ$5.52 billion. The bank says it has no plans to go beyond the Reserve Bank's 10% threshold, with the covered bonds programme taking place over several years during which it hopes to grow its total assets.

The Reserve Bank also says it wants a law passed to enable banks to issue bonds backed by legislation to help attract overseas investors. The central bank says covered bonds will lengthen the term structures of banks’ funding given they’re normally issued for between five and 10 years, diversify funding and provide access to relatively cheap long-term money.

However the Australian Prudential Regulation Authority, which supervises the Australian parents of New Zealand’s big four banks – ANZ, ASB, BNZ and Westpac, doesn’t allow covered bonds because in the event of a default by the bank issuer, depositors’ claims are diluted.

Jamieson said Westpac was targeting its first issue in the covered bond programme, which is likely to seek about 1 billion euros, for the first quarter of 2011. Bank staff would undertake a roadshow meeting potential European investors in January.

There could be domestic issues down the line but the initial target for Westpac was the European market, the world’s biggest and most developed covered bonds market. Jamieson said Westpac was looking at covered bonds as a relatively cheap form of funding to help diversify its funding base in a market (the covered bond market) that had “proven itself through the Global Financial Crisis.”

The term of the initial offer was yet to be determined.

“BNZ’s deal was seven years, it priced reasonably well (at a spread of 62 basis points per annum over the Euro mid swap rate). It depends on the market whether three, five or seven’s more appropriate. We’ll judge it on the way the market is in January and February," said Jamieson.

Separately, he said the bank’s board had also approved the lifting of its minimum Tier One Capital ratio buffer from 6.75% to 8.5% ahead of the introduction over the next few years of the so-called Basel III global banking regulatory reforms. As of September 30 Westpac’s ratio was sitting at 9.9%, well above the Reserve Bank’s 6% minimum.

Meanwhile, the bank’s September quarter General Disclosure Statement shows Westpac grew term housing loans by NZ$268 million to NZ$34.24 billion in the quarter. Jamieson said Westpac had recorded “quite pleasing” growth in housing, lifting its marketshare to 20.2% from 19.6% in the year to September 30.

The bank increased non-housing term loans by NZ$66 million to NZ$13.38 billion in the quarter, and total gross loans by NZ$378 million to NZ$50.76 billion.

Westpac’s term deposits rose NZ$308 million to NZ$17.77 billion. Jamieson said the bank grew its share of the overall deposits market to 19.6% from 19.2% over the year.

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"The Reserve Bank wants to introduce legislation that enshrines the rights of foreign covered bond investors to mortgages written by New Zealand banks ahead of local bank depositors and give the banks carte blanche to issue covered bonds worth more than NZ$32 billion...... to help attract overseas investors.".....

Why is the RBNZ desperate to attract foreign capital....oh I's because the local peasants are unable to save enough to cover the borrowing needs of the banks that borrowed short term to pump the bubbles with keyboard credit during the Labour era of stupidity.....they can't save because most of their income is going on rent or to feed a bank....their rent is high because the govt distorts the rental market by dishing out a benefit to landlords and by allowing landlords to deduct interest on property purchases....deductions paid for by taxpayers...benefits paid for by taxpayers...taxpayers who find they have to borrow heaps more to afford to buy a property because the landlords bloat the demand side.

[   A 500-page Auckland region housing market assessment, published yesterday, says half of the region's 120,000 households renting their homes from private landlords are already in "financial housing stress" - paying more than 30 per cent of their gross incomes on rent.] herald today

How much are taxpayers giving to the landlords..on top of paying the bloated rent!!!

What a great system you are going to help the banks by not helping the taxpayers who can still save some spare income....well done John!

Wally - useful comment. I logged in especially to give you a thumbs-up. Y' gotta ask, who's on who's side, eh. Is anyone on the NZ savers' side, the NZ exporter, the NZ home buyer/owner, the NZ renter - the NZ taxpayer?


In a word Les...No one!....the game is all about getting the economic structure balanced, so the banks end up farming the country...the peasants are thicker than two planks and sooooo easily taken up the garden path to the killing shed.

Yes I'd have to agree Wally...this almost defies belief and would beg you to wonder just what the RBNZ see coming we are not yet privy to....a punch in the face for many looking for relief from an overvalued NZD...yet another attempt to blow air back into the bubble .

I think a chain mail is now in order.....

Dear Foreign Investor......We have everything going for us down here except wealth and prosperity.....we have squandered such wealth we had selling overpriced real estate to each other for a number of years now and find ourselves desperately in need of your help to slow the impact of our impending crash thus reducing casualties to a manageable level.

We must stress Dear Investor that in no way do we face the dilemma Ireland now finds itself in ....however many similarities you perceive....we have highly skilled monetary managers who are known for their patience and complete understanding of the Global Financial Situation.

Looking forward to a favourable response.........Alan

P.S. hope you received our little gift....The Property Press is one of the top magazines in circulation here in  New.......................(depending on investment level ..You..may fill in the blank space.   


Here's our report on that CHRANZ report referred to by the Herald.



The covered bonds debate heats up in Australia -

I have deposits in the bank  because I believe in the event of a meltdown I will be 'made whole' by the bank and its shareholders and as a last restort the Govt. I dont appreciate having my security downgraded without any compensatory increase in my interest rate. Time the free market set interest rates.

"I would recommend you panic" *

Head down to the local pub ............ Have a good look at the customers , a good long look , see the haggard faces feeding coins into the pokie machines , smell the delicate aroma of stale beer and cigarettes  ............... These are the folk that the bank loaned your munny , your deposits , to ! ....

...... Hope yer sleep well tonight ......... Aha ha ha de haaaaaaaaaaaaaaaaaa !!!!

Andrewj...good link as usual.....funny enough draws many of  the conclusions I have...since I first started to really think about whose interest.

AndrewJ.....ta for that ...the down side is that while being flushed out  they (vamps) are insulated by policy makers serving their own interests.

a bit like making sure their in bed with you when you need an alibi. 

And this from the Regulator - Les said it dismal.

Another bank to add to the "stay away from" list. 

I have a term deposit with these losers maturing in March. I am slowly running out of banks to deposit it with.


Does this go on our overseas debt?

We believe so.

So if we have 200 billion of offshore debt and the big four go for 8 bilion each, thats another 32 billion, or like %15 more overseas debt. Just what we need.

Maybe they are just replacing short term debt, or they just didnt have the right loan to deposit ratio?

 "The Reserve Bank also says it wants a law passed to enable banks to issue bonds backed by legislation to help attract overseas investors. The central bank says covered bonds will lengthen the term structures of banks’ funding given they’re normally issued for between five and 10 years, diversify funding and provide access to relatively cheap long-term money"

Make no mistake....the property ponzi scheme is alive and being looked after by the RBNZ and the govt....if you are dumb enough to borrow, expect to be fleeced.

Also you will witness a massive bank advertising blitz aimed at suckering you into the bubbles with cheap loans and prizes too. Don't be fooled. The end game is closing in fast. Keep an eye on the foreign bond reports. Keep you money close and be ready to move it fast. Pay down debt asap and do not borrow.

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Days to the General Election: 37
See Party Policies here. Party Lists here.