EBA Report on the Harmonization of Covered Bonds

  • European Banking Authority (EBA) proposes three-stage plan for regulating covered bonds in Europe
  • Pfandbrief banks: High minimum standards are needed to safeguard preferential regulatory treatment on a lasting basis

In a report comprising some 150 pages, the EBA today presented in concrete terms the proposals – first outlined in the late summer of this year – for a European harmonization of  national covered bond regimes. “We welcome the report, with which the EBA has published the first concrete regulatory proposal for the European covered bond markets. The Pfandbriefbanks will assess the EBA’s proposal constructively, and will contribute through their experience and expertise to a both robust and differentiated European regulation,” commented Jens Tolckmitt, Chief Executive of the Association of German Pfandbrief Banks (vdp). “It is largely based on EBA’s best practices paper of 2014 which in term comprised a lot of important features of the German Pfandbrief Act”.

In order to safeguard the preferential regulatory treatment of covered bonds in Europe on a continuing basis, the vdp had already called for a principles-based integration and high minimum standards prior to the EBA report. Wolfgang Kälberer, Head of the vdp’s Brussels Office, said:

“Full harmonization of covered bond markets in Europe based on low standards is therefore no longer under discussion. The EBA’s regulatory proposal is very promising and points in the right direction. However, a number of the suggestions are very far-reaching, and as we know, the devil is in the detail.”

In addition to the EBA’s report, the European Commission expects to receive by the end of March 2017 the conclusions of a study on the possible impact of the regulation of covered bond markets.

The Commission’s decision is expected towards the middle of 2017 on whether – and if so, what – legislative measures ought to be taken.


As part of the capital markets union, the European Commission wants to make the European covered bond market more homogeneous, more transparent and, therefore, even more attractive for investors and issuers. At the same time, the aim is to lay the foundations to securing the privileged regulatory treatment of covered bonds in Europe. As the basis for integrating the national covered bond markets, the first stage of the approach envisages a directive which defines the essential features of covered bonds. In the second stage, the criteria that covered bonds have to meet – over and above these features – to be eligible for preferential treatment in the Capital Requirements Regulation (CRR) are to be more narrowly defined than is currently the case. In stage three, the convergence of national covered bond systems is to be pursued further voluntarily, probably based on a recommendation by the Commission.