20 November 2017
On 20 November 2017 the European Central Bank (ECB) published a Decision amending its previous Decision (ECB/2014/40) on the implementation of the third covered bond purchase programme (CBPP3). In essence, the amendment reflects the decision adopted by the ECB Governing Council on 4 October 2017 to exclude covered bonds commonly referred to as conditional pass-through covered bonds from purchases under the CBPP3, if they are issued by an entity with a first-best issuer rating below Credit Quality Step 3 (CQS3), as of 1 February 2018.
In view of this, the following point 9 is added to Article 2 of Decision ECB/2014/40:
9. Covered bonds shall be excluded from purchases under the CBPP3 where both: (a) they have a conditional pass-through structure, whereby pre-defined events lead to an extension of the bond’s maturity and a switch to a payment structure dependent primarily on cash flows generated by the assets in the underlying cover pool; and (b) they are issued by an entity with a first-best issuer rating below CQS3.
For reference purposes, the Decision of 15 October 2014 on the implementation of the CBPP3 (ECB/2014/40) can be accessed here.