In Strasbourg on Tuesday 4 July, the European Parliament adopted an own-initiative report calling on the European Commission to present a directive on a pan-European framework for covered bonds – bonds the servicing of which is guaranteed by mortgages or public-sector receivables.
The report, which was adopted by a large majority (543 to 99 with 56 abstentions), with no amendments since its adoption by the economic and monetary affairs committee (see EUROPE 11813), calls upon the Commission to draw a distinction between three types of asset: - premium covered bonds, which would have to meet more stringent criteria for the quality of the asset specified in the 'CRR' prudential regulation; - ordinary covered bonds, which would be easily compatible for users; - European secured notes, which would include riskier assets such as lending to SMEs or investments in infrastructure not backed by the government.
“Expanding the institutional environment to these more risky or less liquid classes of assets would be growth-enhancing, we believe it would serve the objectives of the Capital Markets Union”, said the rapporteur. He went on to argue that this regulatory landscape would also help to open up the European capital markets to third-country issuers, which will be able to use these instruments on condition that they have developed a similar institutional framework.
Welcoming the consensus across political groups that appears to be emerging on the best way to move forward, the European Commissioner for Financial Services, Valdis Dombrovskis, said that he was in favour of a solid covered bonds label and assured the MEPs that the Commission will bear the approach called for by the European Parliament in mind when it legislates on the matter in 2018, as announced in its mid-term review of the CMU (see EUROPE 11804). (Original version in French by Marion Fontana)