Covered bond harmonisation - staying on track as the finish line approaches

Sascha Kullig

It has been confirmed: the European Commission has announced that a draft law on the EU-wide harmonisation of covered bonds will be published in the first quarter of 2018. In other words, a project that began back in late 2012 is now on the final straight. The vdp and its member institutions will do all they can to ensure that the actual goal is kept in view as the finish line approaches.

In March 2013, in its Green Paper on long-term financing, the European Commission announced it was investigating whether greater harmonisation of covered bonds in Europe would be appropriate. By the end of 2012, the European Systemic Risk Board had asked the European Banking Authority (EBA) to prepare a report on possible “best practice principles” for covered bonds. Finally, Article 503 of the Capital Requirements Regulation (CRR)  adopted in 2013 included an instruction to the EBA to examine whether the privileged own funds requirements under Article 129 CRR for covered bonds were still justified. By completing these tasks in 2014 the EBA reached a first milestone, followed in December 2016 by extensive recommendations for harmonisation of covered bonds.