Originally published in IFLR/July/August 2012.

Anna Pinedo and Jerry Marlatt of Morrison & Foerster describe the framework regulating foreign banks’ issuance of covered bonds into the US.

Although the United States still lacks a statute that would permit US depository institutions to issue covered bonds, foreign banks have found that US investors are interested in covered bonds. Foreign banks have met investor demand by issuing covered bonds into the US relying on their domestic covered bond frameworks. The cover pools supporting these foreign-issued covered bonds have been comprised exclusively of assets located outside the US.

When issuing covered bonds into the US, foreign issuers must comply with US securities laws, including the Securities Act. This law requires that all securities issued and sold in the US be either registered or exempt from registration. To date, offerings of covered bonds by foreign banks have been structured as exempt offerings, although, as discussed below, recent developments may lead to a new approach.

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