The growing issuance of covered bonds prompted Fitch Ratings to issue a report saying that over-dependence on covered bonds, which in some cases account for as much as 70 per cent of a bank's balance sheet, is not a risk for many banking groups.The ratings agency did reiterate that this wasn't the case for all banking groups.    According to Fitch, annual benchmark issuance totalled €125 billion in 2009, rose to €183 billion in 2010 and is expected to reach €200 billion in 2011. Out of this, €40 billion has already been issued in the first two months of the year.While covered bond issuance is increasing, the firm said it is important to note that there is a much greater increase in the size of cover pool assets, because of larger over-collateralisation, than in the past. This reduces the size of assets available to unsecured debt and depositors in the event of an issuer default. But, according to Fitch, a bank's creditworthiness increases when it has access to low-cost, long-term funding sources like covered bonds, and this is beneficial to unsecured creditors.Fitch also noted that growing covered bond funding could crowd out appetite for senior unsecured debt. But, apart from some extreme cases, it doesn't believe the risk of covered bond funding acting as a deterrent to potential senior unsecured debt investors is large for the majority of issuing banks.Fitch ranked 120 entities from 18 countries including Bank of New Zealand. For about half of these, covered bonds represent less than 10 per cent of their total liabilities, plus equity, and for 83 per cent of the sample it was less than 20 per cent. For the remaining issuers, covered bonds formed 20-70 per cent of their balance sheets.