Bank of China: a ‘covered bond’ in name only

It could have been a game-changer. Instead, Bank of China settled for a Frankenstein — a deal that was not quite a covered bond, but not quite a conventional bond either.

Bank of China: a ‘covered bond’ in name only

Bank of China raised $500 million from a green covered bond last week, becoming the first Chinese issuer to ever use the covered bond format for funding.

In theory, the deal should open up a potentially lucrative source of business for banks and a markedly different asset class for investors. In practice, the chances are it won’t.

The deal was by no means a failure. It generated $900 million of demand. It...

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