Member States' ambassadors to the EU (Coreper) reached a political agreement in principle on Wednesday 28 November on the proposal to create a European label for covered bonds (see EUROPE 11979).
As a reminder, a covered bond is a debt issued by a credit institution and guaranteed by a separate pool of hedging assets to which investors have a preferential claim in case of failure of the issuer.
Overall, the Council's position reflects the main elements of the Commission's proposal, namely the structural characteristics of the instrument, the rules allowing the use of the European guaranteed bond label and the strengthening of the conditions for granting preferential prudential treatment to guaranteed bonds under the ‘CRR’ Regulation on equity requirements.
However, it does provide some clarification in the text, in particular on eligible hedging assets.
The objective was to extend the markets for covered bonds in the EU, without constraining those that already exist and are particularly developed, especially in Germany, Denmark, France, Spain, Italy, Luxembourg, Italy and Sweden, a European source explained.
The European Parliament’s Committee on Economic and Monetary Affairs adopted on 20 November last (see EUROPE 12141) a position much further removed from the European Commission's initial proposal. The Parliament has indeed introduced a distinction between “high quality covered bonds”, which should meet higher criteria on the quality of assets specified in Article 129 of the prudential regulation ‘CRR’, and the others - "ordinary quality covered bonds” - which do not meet these criteria (see EUROPE 12093).
Inter-institutional negotiations can start once the Parliament has validated its position at the December plenary session. (Original version in French by Marion Fontana)