Dutch Plan State-Backed Mortgage Bonds to Aid Banks

The Dutch government agreed with pension funds and banks to set up an institution that will sell mortgage bonds backed by the country’s top credit rating, a bid to reduce financing costs for lenders and consumers.

To ensure liquidity in the securities, which will be modeled on government bonds and have differing maturities, the vehicle should aim to issue at least 50 billion euros ($67 billion) of mortgage debt in five years, according to documents prepared by a committee advising the Dutch government. Lenders will transfer low-risk loans through securitizations, while retaining default risks to avoid “moral hazard,” it said.