News
New capital requirements proposed for banks by the Reserve Bank of New Zealand (RBNZ) are likely to have consequences well beyond the banking sector. Economics in the lending market could be set for change, which may in turn reshape the dynamics of corporate bond issuance in New Zealand.
Bank of Montreal (BMO) has returned to the Australian dollar market for the first time since Canada’s total loss-absorbing capacity (TLAC) regime came into effect. Deal sources say the success of the transaction reaffirms domestic support for Canadian bail-in deals.
Attractive pricing conditions driven by demand outstripping supply in the mid-curve was the main factor driving International Finance Corporation (IFC)’s relatively large Kangaroo print on 10 July, deal sources say. While high-grade Kangaroo issuance volume is flat in 2019, the mid-curve has experienced something of a renaissance.
The most active participants in Australia’s sustainable-finance market are considering how the EU taxonomy’s technical report may be locally applicable. It is early days for a local understanding and application of European principles, but harmonisation between jurisdictions appears to be a preferred outcome for many – including leveraging the EU’s work to reinforce local standards.
Deals from Toronto-Dominion Bank (TD Bank) and BNP Paribas continued the recent run of global financial institution (FIs) issuance in Australian dollars. Lead managers say higher-yielding product from global borrowers is proving attractive to investors in a rallying but low-rates market, to the extent that BNP Paribas was even able to print a rare additional tier-one deal from a non-Australian issuer.
The nascent green, social and sustainability (GSS) bond space in New Zealand continued to advance on 3 July, when Auckland Council became the market’s first repeat GSS issuer. Deal sources cite greater acceptance of green as an asset class as further evidence of market maturity.
The Australian Prudential Regulation Authority (APRA) has reduced the incremental total-capital uplift initially required of Australia’s big-four banks under its total loss-absorbing capacity (TLAC) equivalence regime. The regulator believes it should be possible for Australian banks to fund a smaller initial uplift with tier-two securities rather than via a new asset class.
New analysis from S&P Global Ratings (S&P) predicts further consolidation within the mutual sector. This consolidation should see greater capital-markets activity from the sector thanks to greater entity scale and expansion of the range of funding tools available to mutual banks.
The Reserve Bank of New Zealand (RBNZ) has published a summary of the 161 submissions it received on its proposals to increase the capital requirements of locally incorporated banks. Bank and financial-market responses to the consultation mirror market commentary on the topic but martial the industry response to proposals most in the sector see as onerous.
On 18 June, the EU technical expert group (TEG) subgroup on taxonomy published the Taxonomy Technical Report. The taxonomy is expected to become the world’s foremost roadmap for sustainable investment, with a key definitional role in the green-bond market.
Bank balance sheets doubled their participation in New South Wales Treasury Corporation (TCorp)’s latest syndication. Market participants say this is no surprise given a recent tweak to Australia's liquid-assets regime for major banks – adding that the changes should drive further incremental bank demand to local high-grade issuers.
Standard Chartered priced its debut Kangaroo transaction on 25 June, with a A$1 billion (US$700.1 million) deal eligible for minimum requirement for own funds and eligible liabilities (MREL). Deal sources say the Kangaroo format is becoming a reliable means for global financial institutions (FIs) to gain domestic investor penetration with total loss-absorbing capacity (TLAC)-eligible deals.