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The cost of funding as well as an attention to the credit quality of counterparties are changing the way some banks are doing structured products business. With an eye on maintaining previous cheap funding levels, issuers are taking a long hard look at their callable bonds and in many cases deciding against the option they have to call them. Richard Jory reports

A decision taken by Deutsche Bank in December 2008 not to call one of its callable upper tier 2 bonds took the funding market by surprise and led to a re-evaluation of the traditional methods for pricing callable bonds. Previously always priced to the call date - and therefore cheaper than a bullet bond - Deutsche created an uproar when it decided against cashing in a deal on the basis that it wanted to maintain the attractive funding levels on offer.

"It's a call at a spread, but it is always