(f) exposures in the form of extremely high quality covered bonds, which shall comply with all of the following requirements: Level 1 assets shall only include assets falling under one or more of the following categories and meeting in each case the eligibility criteria laid down herein: Amendments to other Directives (Articles 28-29)įurther information can be found in the Article 2.1 Overview of Covered Bonds of the ECBC Fact Book 2021 Covered bond public supervision (Articles 18-26) Structural features of covered bonds (Articles 4-17) Subject matter, scope and definitions (Articles 1-3) The CBD consists of the following Titles: Some mandatory provisions also contain optional elements, and vice-versa This is also illustrated by the fact that the CBD contains both mandatory and optional provisions. While the CBD builds on the essential traditional quality features of covered bonds, it leaves national legislators a wide margin of leeway in shaping their national CB laws. This is of fundamental importance both for understanding the regulatory package and for interpreting the individual provisions. This means that the EU provisions lay down the minimum requirements for secured bonds issued by credit institutions and, in a number of ways, leave room for particularities and detailed regulations at the national level this has also been the (almost) unanimous petition of CB issuers and other market participants. The regulatory discussion on the creation of the CB harmonisation package was characterised by the “principle based harmonisation” aimed at by the EU regulatory framework. Given that the CBD will become the new single reference point for regulation related to covered bonds, various other provisions on covered bonds in other directives that refer to Article 52(4) of the UCITS Directive are thus also indirectly amended. The CBD regulates the requirements for covered bonds, which, up to now, were only laid down in a rudimentary fashion in Article 52(4) of the UCITS Directive this provision has been accordingly amended and now refers to the CBD, as has the Bank Recovery and Resolution Directive (BRRD). The obligations of the credit institution in respect of the cover pool are supervised by public.Pool to satisfy the claims of covered bondholders at all times. The credit institution has the ongoing obligation to maintain sufficient assets in the cover.Bondholders have a claim against a cover pool of financial assets in priority to the unsecured.Is subject to public supervision and regulation. The bond is issued by-or bondholders otherwise have full recourse to-a credit institution which.Special-law based frameworks or general-law based frameworks: These common essential features should be understood as the ECBC’s minimum standards for coveredĬovered bonds are characterised by the following common essential features that are achieved under It is intended that they be read independently from any other definition or interpretation of coveredīonds, such as those set out in the Covered Bond Directive and Article 129(1) of the Capital Requirements Regulation (CRR). The ECBC sets out below what it considers to be the essential features of covered bonds, together With over EUR 2.9 trillion outstanding at the end of 2020, covered bonds play an important role in European capital markets, contributing to the efficient allocation of capital and, ultimately, economic development and recovery. This evolution led to the issuance of the Covered Bond Directive which enshrines the key characteristics of the instrument and which acts also as international standard-setter. The internationalisation of formerly domestic covered bond markets began more than 15 years ago with the introduction of a new benchmark product attracting international institutional investors and providing the necessary market liquidity.Īs a consequence, many European countries have introduced new covered bond legislation or have updated existing rules to be a part of this development and to also respond to the considerable growth of mortgage lending activities in the European Union. Thus, covered bonds play an important role in the financial system. The portfolio investor has the advantage of investing in safe bonds with a relatively high return. The issuance of covered bonds enables credit institutions to obtain lower cost of funding in order to grant mortgage loans for housing and non-residential property as well as, in certain countries, to finance public debt. Covered bonds are increasingly used in the marketplace as a funding instrument, in addition to savings deposits, senior issuances, mortgage-backed- securities, etc.
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