The Monetary Authority of Singapore (the “MAS”) has issued a consultation paper on proposed amendments to MAS Notice 648 on issuance of covered bonds by banks incorporated in Singapore. The proposed changes seek to further facilitate the issuance of covered bonds in Singapore. The consultation closes on 28 February 2015.

Since 31 December 2013, all banks incorporated in Singapore and licensed by the MAS to conduct banking business are permitted to issue covered bonds subject to conditions under MAS Notice 648 Issuance of Covered Bonds by Banks Incorporated in Singapore (“MAS Notice 648”).

The following are the proposed changes to MAS Notice 648.

  • Structure of covered bond programme: The MAS is proposing to amend MAS Notice 648 to specifically allow a bank to declare a trust over the residential mortgage loans that are used as collateral for the covered bonds and for the beneficial interest in the declared trust to be transferred to the SPV.
  • Cap on cash and cash equivalents: MAS Notice 648 currently limits the amount of cash and cash equivalents that can be included in the cover pool to 15% of the aggregate value of the cover pool assets. The MAS is proposing to allow cash and cash equivalents to exceed the 15% limit in certain circumstances, e.g. to account for operational timing differences.
  • Loan-to-Value limit of residential mortgage loans: The MAS proposes to amend MAS Notice 648 to clarify that the LTV limit of 80% applies at the point in time where the residential mortgage loan is added to the cover pool. Subsequently, residential mortgage loans with LTV in excess of 80% may be retained in the cover pool provided certain conditions are met.

Reference materials

To read the consultation paper from the MAS website www.mas.gov.sg, please click here