The European Banking Authority (EBA) has published a report that builds on previous work on covered bonds and provides additional recommendations on how to further harmonise Member State national frameworks. The report presents an in-depth regulatory and market analysis undertaken by the EBA as a follow up to a previous recommendation issued by the European Systemic Risk Board.

The EBA proposes a covered bond framework based on a ‘three step approach’ designed to harmonise covered bonds in the EU:

  • a new covered bond Directive should be developed to provide a definition of covered bond and specify the structural quality requirements for all regulated covered bonds in the EU;
  • the Capital Requirements Regulation should be amended to strengthen conditions for those covered bonds that seek preferential capital treatment; and
  • convergence of national frameworks should be encouraged on a voluntary basis in some specific cases by means of non-binding instruments.

The EBA’s findings will provide input into the European Commission’s considerations on the further development of the Capital Markets Union project.

View EBA report on covered bonds, 20 December 2016