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Summary The 2008‐2009 liquidity crisis reversed what had been a growing use of repurchase agreements (repos) and unsecured debt funding by banks. Fitch Ratings finds that covered bonds as a funding source remained relatively resilient during this period, allowing many banks to retain some control over soaring refinancing costs. Banks have since reported heavier use of secured financing through renewed repo activity and continued issuance of covered bonds.
Fitch believes that the progress towards the post‐crisis resolution regimes that banks will operate under is creating a structural increase in the cost of bank funding and continues to drive the increased use of secured funding. In addition, this is being driven by cyclically high levels of investor risk aversion currently, which Fitch expects to fall with broader economic recovery and more certainty around resolving problems in peripheral euro zone countries, somewhat mitigating negative trends for unsecured funding. In addition, limited supply of high‐quality cover pool assets and national regulatory limits serve as checks to the unfettered use of covered bonds, allaying some concerns over high issuance volumes in recent months.
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FITCH POLSKA SA
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Fitch believes that the progress towards the post‐crisis resolution regimes that banks will operate under is creating a structural increase in the cost of bank funding and continues to drive the increased use of secured funding. In addition, this is being driven by cyclically high levels of investor risk aversion currently, which Fitch expects to fall with broader economic recovery and more certainty around resolving problems in peripheral euro zone countries, somewhat mitigating negative trends for unsecured funding. In addition, limited supply of high‐quality cover pool assets and national regulatory limits serve as checks to the unfettered use of covered bonds, allaying some concerns over high issuance volumes in recent months.
... full in attachment
FITCH POLSKA SA
js
