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Owing to specific provisions on asset segregation contained in the primary legislation leading to its privatisation in December 2003, CDP is authorized to issue bonds backed by a pool of assets.
According to the provisions, in 2004 CDP put in place its Euro 20 billion Covered Bond Programme for the issuance of triple-A rated bonds backed by loans to Italian public sector entities with the purpose of re-financing its public sector lending business.
As the legal framework under which CDP's Covered Bonds are issued only provides for the on-balance-sheet ring-fencing of the cover pool, structural features have been introduced via contractual agreements to replicate the conventional highest-rated Covered Bond product and to enhance protection for investors. In particular, specific structure finance mechanisms have been designed providing for an effective "de-linkage" from the credit risk of the issuer.
CDP is the first financial institution authorized to issue Covered Bonds under the Italian Law. In the near future Italian private sector banks are also expected to enter the market under a General Covered Bond legislation, while CDP will continue to rely on its own specific legal framework.
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