Press release

Principle-based approach critical for the establishment of a harmonised EU covered bond framework

19 April 2017

In the context of the European Institution’s ongoing consideration of a potential European framework for covered bonds, the European Covered Bond Council (ECBC) supports the concept of a high-quality principle-based framework, which will act as a regulatory and qualitative market benchmark for both European and global market participants.

As such, the ECBC would like to express its appreciation of the careful market analysis which has been undertaken by the European Parliament, the European Commission and the European Banking Authority over recent months.

The ECBC calls for an inclusive approach to be adopted which would permit the full integration of the current regulatory treatment of covered bonds into the potential new European framework for the asset class. Any modification of the current regulatory recognitions for CRR or UCITS compliant covered bonds would have severe consequences for investor confidence and the anti-cyclical, crisis management role played by this strategic asset class during the financial crisis.

In terms of collateral assets, the ECBC fully supports a two-tier, principle-based approach consisting of: (i) the traditional collateral assets group of covered bonds; and (ii) an additional group of UCITS compliant dual recourse instruments, with different requirements in terms of eligible cover assets and regulatory treatment, and which should have a different name, such as European Secured Note, to mark a clear distinction from traditional covered bonds.

Against this background, the ECBC would like to highlight the two market-led initiatives it has established with the aim of enhancing transparency for investors:

  • The Covered Bond Label initiative, which provides a unique online database for investors on CRR compliant covered bonds, with a wealth of quantitative and qualitative information on collateral assets and liabilities.
  • The European Secured Note (ESN), as proposed by the EMF-ECBC, which is a separate, UCITS compliant asset class for alternative collateral reproducing certain covered bond techniques such as a definite legislative framework, asset segregation, public supervision and dual recourse.


The ESN proposal has been elaborated by the ECBC’s Long-Term Financing Task Force, which consists of covered bond experts from the major covered bond jurisdictions in the EU. This Task Force stands ready to support the relevant institutions at national and European level in the future development of this asset class.


Luca Bertalot, EMF-ECBC Secretary General, said:

“It is important to acknowledge the valuable work already undertaken by the European Institutions on covered bonds. This framework review process offers an opportunity to give a truly shared European profile to covered bonds, which are already the backbone of bank funding across much of Europe. In our view, going forward, it is critical to define a principle based approach maintaining the regulatory recognition of the safe and transparent profile of traditional covered bonds, which have been enhanced by the introduction by market participants of the Covered Bond Label and its Harmonized Transparency Template, and yet give an opportunity to financial institutions to use covered bond techniques for alternative collaterals.”