Treasury has released an exposure draft Banking Amendment (Covered Bonds) Bill (No.1) 2011 to permit the issuance of covered bonds by Australian banks, credit unions and building societies.

If passed the Bill will amend the Banking Act and permit investors to have priority over an ADI’s assets in a “cover pool”, the value of which must at all times no greater than 8%, or such other percentage as is prescribed by the regulations, of the value of the ADI’s assets in Australia at that time.