EC Vice President on Pan European Covered Bonds Framework

Mr. Dombrovskis added that, as announced by the Capital Markets Union mid-term review, the EC intends to present a legislative proposal on covered bonds in the first quarter of next year. An EU initiative in this regard should serve two complementary purposes. First, it should stimulate covered bond markets as a stable and cheap source of funding for credit institutions and, in return, banks should be able to better finance the real economy. Second, the covered bond framework should be robust enough to justify the preferential prudential treatment granted to it, for instance, in the form of preferential capital risk-weights. In addition, there is a great potential in developing covered bond markets in EU countries that do not have them yet and also in attracting investors from third countries. A robust and widely recognized EU covered bond label would be a major help in this respect. “We will be analyzing all these elements in an impact assessment that will help us to design the future proposal.”

The EC is also assessing the case for developing European Secured Notes and will decide on possible initiatives on this, following the results of the assessment, said the EC Vice President. However, in the first stage, the EC will focus on traditional instruments backed by mortgages or public-sector loans. In conclusion, the EC Vice President showed appreciation for the work done by the European Parliament and emphasized that it is a source of encouragement for future cooperation in this important field.

Related Link: Speech

Keywords: Europe, EC, Capital Markets Union, Covered Bonds, Secured Notes, Securities