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.
Established in 1967, the European Mortgage Federation (EMF) is the voice of the European mortgage industry on the retail side of the business, representing the interests of mortgage lenders at European level.
