April 16, 2019

The European Parliament (EP) published adopted text on the proposal for a regulation of the European Parliament and of the Council on sovereign bond-backed securities (SBBS). The text adopted by EP includes certain amendments by European Parliament to the EC proposal. EC welcomes the adoption of the position of EP on SBBS. In May 2018, EC had proposed a regulation on SBBS in EU, the comment period for which ended on July 20, 2018. The proposal was aimed to help banks diversify their sovereign exposures and further weaken the bond with their home governments.

The proposal lays down precise eligibility criteria for SBBS to benefit from the envisaged regulatory treatment. Such standardization will enhance the liquidity of SBBS and make them appealing to a larger number of investors. The proposal also amends a number of legislative acts setting out the regulatory treatment of SBBS held by banks and other financial operators. The proposed regulation lays down a general framework for SBBSs and applies to original purchasers, special purpose entities, investors, and any other entity involved in the issuance or holding of SBBSs. The underlying portfolio of an SBBS issue shall only consist of sovereign bonds of member states whose currency is the euro and the proceeds from the redemption of those sovereign bonds.

 

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Keywords: Europe, EU, Banking, Securities, SBBS, Sovereign Bonds, EC, European Parliament

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