Sifma: The time for US covered bonds is now

The testimony will be delivered before the Capital Markets and Government Sponsored Enterprises Subcommittee of the Committee on Financial Services.

SIFMA has long supported the development of a covered bonds market in the U.S., as it believes that U.S. covered bonds are an untapped but proven resource that could be invaluable in meeting the need for long-term and cost-effective funding that is sourced from diverse parts of the private-sector capital markets and that can be translated into meaningful credit for households, small businesses, and the public sector.

SIFMA also believes that the time for U.S. covered bonds is now. While the balance sheets of financial institutions cannot replace the multi-trillion dollar securitization market, covered bonds can bridge funding gaps in the short term and can supply a much needed source of complementary liquidity in the long term. Similarly, while covered bonds are no panacea for the difficult policy issues that have been raised in the context of GSE reform, a robust covered-bond market would inject private capital where none exists today and would contribute ultimately to a more stable system of mortgage finance. With the success of a fragile economic recovery hanging in the balance, we simply cannot afford to wait any longer.

In the testimony, SIFMA also stresses the need to develop a legislative framework for U.S. covered bonds that stays true to the distinctive features of traditional covered bonds and provides investors with the certainty they need to support the market.

Read Sifma's testimony: