vdp welcomes European Commission's proposal on harmonisation of covered bonds

The Association of German Pfandbrief Banks (vdp) welcomes the legislative package put forward today by the European Commission on the harmonisation of covered bonds in the European Union. "As expected, the proposed directive is principle-based and lists all the key quality characteristics of covered bonds. It calls for a minimum level of harmonisation and leaves sufficient scope for specific national features, based on national laws. Only the requirements for cover assets eligibility could have been more detailed in the opinion of Pfandbrief banks, to provide better protection for covered bonds as a quality product," said Jens Tolckmitt, Chief Executive of the Association of German Pfandbrief Banks.

The regulations that have been presented comprise a general covered bond directive, which will replace the relevant provisions of the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive, and an addition to Article 129 of the "Capital Requirements Regulation" (CRR), which makes a clearer distinction between the core group of traditional covered bonds and other types of covered bonds. With its current proposal, the Commission is calling for high-quality cover assets, although it has not provided details of the exact requirements for permissible cover assets. This general wording allows the interpretation of eligible cover assets to be taken beyond the scope of traditional covered bonds such as Pfandbriefe. The aim is to enable new types of assets to be used as cover, in order to finance additional growth in the real economy.

"We welcome the general compatibility of the moderate regulations of the draft directive and the plans to tighten up Article 129 CRR with the existing standards of the Pfandbrief Act. The proposal will further improve future prospects for covered bonds as a key product for bank funding in Europe and will create a stable basis for their privileged regulatory treatment. What is crucial for us is that the rules leave the necessary scope to further develop the quality of national products such as Pfandbriefe," Jens Tolckmitt said.