Toronto-Dominion says proposed law may affect public covered bonds

By Susanna Moon

Chicago, May 3 - Toronto-Dominion Bank said that the government of Canada's proposed covered-bond legislation could affect the bonds issued under its €10 million global public sector covered-bond program.

The bill contains proposed amendments to the following federal acts:

(a) Amendments to the National Housing Act (Canada) to provide for the establishment of a legislative framework for covered bonds for which (i) certain federal financial institutions including banks and (ii) provincial cooperative credit societies, may apply to register covered bond programs with the covered bond collateral being housing loans that are not insured by CMHC or other specified insurers and that do not exceed a loan-to-value ratio of 80%; and

(b) Amendments to the Bank Act (Canada) to prohibit banks from issuing covered bonds except under the proposed framework.

If implemented as written, the covered bond amendments would have the following implications for the program and the covered bonds issued under it:

• No covered bonds will be permitted to be issued under the program;

• The program will not be permitted to be a registered program under the proposed framework; and

• Covered bonds under the program will not be permitted to be exchanged for legislative covered bonds under the proposed framework due to the covered bond collateral limitation under the proposed framework.

Holders may see a copy of the bill at http://www.parl.gc.ca/HousePublications/Publication.aspx?Docid=5524772&file=4.

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