The European Parliament adopted by a comfortable majority (448 votes in favour, 199 against, 8 abstentions) the draft Fernández report on the proposal for a regulation to promote the emergence of a market for sovereign bond-backed securities (SBBS) of euro area countries (see EUROPE 12026/3), without amendment on Tuesday 16 April.
MEPs believe that these securities would help to diversify the sovereign exposures of banks and financial investors and broaden the range of low-risk euro-denominated assets. “Additionally, they would render smaller and less liquid markets more attractive for international investors”, said Jónas Fernández (S&D, Spain), in a statement.
SBBS securities would consist of a diversified basket of euro area sovereign bonds distributed according to their economic weight. Depending on their risk appetite, investors would acquire risky tranches (‘junior tranches’) or more guaranteed repayment in the event of default (‘senior tranches’).
According to MEPs, the nominal value of the junior tranche should be at least equal to 5% of the nominal value of outstanding amounts of the entire SBBS issue, whereas the Commission initially proposed a 2% threshold.
The European Parliament assigns to the European Securities and Markets Authority the direct supervision of the sovereign bond market, including the imposition of administrative and financial sanctions, while the Commission entrusted this role to national authorities. In addition to granting or revoking certification of an SBBS issue, it will have to assess whether the issue of the securities has a negative impact on the liquidity of a Member State's sovereign bond market. The Commission will therefore have to define the concept of ‘market liquidity’.
Provisions are also planned to ensure the continuity of the issuance of SBBS securities when a Member State no longer has access to the sovereign debt market. The composition of the underlying portfolio of SBBS securities would then be adjusted.
In the EU Council, discussions on this legislative proposal are at a standstill.
See the text approved by Parliament: http://bit.ly/2PcUUQg. (Original version in French by Mathieu Bion)