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OCBC looking to issue covered bonds

OVERSEA-CHINESE Banking Corporation (OCBC) is planning a covered bond programme, it told The Business Times on Monday.

"We are looking into the setting-up of a covered bond programme as an option to diversify our funding sources and broaden our investor base," said Ang Suat Ching, head of funding and capital management, OCBC Bank.

Reuters reported on Monday that the bank is targeting a covered-bond issue of US$1 billion in size, and will issue them in the summer, citing sources. OCBC would be the third and last bank in Singapore to do so.

UOB is set to issue a euro-denominated five-year covered bond, reports showed. Asked if OCBC is looking at euro-denominated issues, Ms Ang said: "We will continue to monitor developments of the covered bond market and assess any future issuance of such bonds taking into consideration conditions in the major markets and our funding requirements across the different currencies."

Covered bonds are most comparable to mortgage-backed securities (MBS). Banks can package assets such as mortgages into securities that yield a cash payment, which are then sold to investors. The yield would reflect the credit quality of the underlying assets. The difference is that unlike MBS, covered bonds' assets remain on the bank's balance sheet.