The European Covered Bond Council revealed details of a covered bond labelling initiative at a plenary meeting in Barcelona today (Wednesday), with Michel Stubbe, head of the market operations analysis division at the ECB but speaking in a personal capacity, warmly welcoming the progress that the ECBC has made.

ECBC plenary venue, Barcelona

Antonio Torio, chairman of the ECBC, provided an overview of the key objectives and elements of the covered bond label. The former include providing market participants with access to relevant and comprehensive information, enhancing “the regulatory recognition and trust” of the asset class, and promoting liquidity and strengthening the secondary market.

The label will be implemented on the basis of self-certification by issuers, he said, with the labelling process involving three bodies: the ECBC steering committee, a label office or secretariat, and an advisory council.

The key elements of the structure of the labelling process are “pretty much set”, said Torio, with the next phase to focus on putting in place concrete structures to facilitate implementation of the label.

Michel Stubbe, head of the market operations analysis division at the European Central Bank, who was speaking in a personal capacity and not necessarily reflecting the views of the Governing Council, said that he “warmly welcomes” the progress the ECBC had made in the past month. The initiative appeared to have reached a “different stage of maturity” compared with even a few months ago, he added.

Stubbe also said that the ECB’s collateral framework would take into account a covered bond label to the extent that the market behaviour of covered bonds with an industry label differs from that of covered bonds without such a designation.

The impact a label could have on the regulatory treatment of the asset class, such as in relation to liquidity buffers, was also discussed at the plenary, with Daniel Loughney, portfolio manager at AllianceBernstein, saying that he sees a link between the existence of an industry label and regulatory treatment of covered bonds.

The investor community should therefore lend as much support as possible to the label so that it can influence regulation of covered bonds, he said. He added that the initiative would also increase liquidity.