Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EC and Directive 2014/59/EU

1. Covered bonds are financial instruments that are backed by a ringfenced pool of assets (the ‘cover pool’) to which investors have a preferential claim in case of failure of the issuer. Unlike asset-backed securities (securitisation), the underlying assets remain on the issuer’s balance sheet so that the investor has a “dual recourse” to both the issuer and the underlying assets in case of default.

2. As part of the Capital Markets Union (CMU) project, the Commission has proposed an enabling legislative framework for covered bonds, with the objective of leveraging Europe’s banking capacity to support the wider economy with a set of safe and efficient funding tools. The Commission state that increased harmonisation of approaches across the EU will increase the potential for cross-border flows, which will grow the market, having positive impacts on bank funding and financial stability through the diversification of risk.

3. On the basis of the European Banking Authority’s (EBA) recommendations, the Commission has presented two proposals to achieve these goals. The first proposal for a Directive specifies the core elements of the covered bonds, provides a common definition and sets out the requirements for “European Covered Bonds”. The second consists of a Regulation amending the Capital Requirements Regulation (CRR) and seeks to strengthen the requirements for preferential capital treatment.

4. Currently, the regulatory framework for covered bonds has relied on principle-based EU regulation in the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive and CRR/CRD whereas the actual implementation has been left at national level, resulting in different national approaches on key technical issues.

Topic  Budget 
Department  HMT 
Council Reference  7064/18 
COM Reference  COM(18)94 
SEC Reference   
PE Cons   
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Associated file(s)


  1. 11 October 2018: Glen - Boswell - 498 KB - pdf
  2. 11 October 2018: Glen - Cash - 498 KB - pdf
  3. 21 November 2018 Glen-Cash - 550 KB - pdf
  4. 6 August 2018 Glen-Boswell - 78 KB - pdf
  5. 6 August 2018 Glen-Cash - 68 KB - pdf
  6. 7064/18 - 614 KB - pdf
  7. 7064/18 + Add 1 - 3 MB - pdf
  8. 7064/18 + Add 2 - 401 KB - pdf
  9. EM 7064/18 - 3 MB - pdf

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