A waiver on a limit on the inclusion of MBS in cover pools for internal securitisations looks set to be extended until 2017 under CRD IV, according to a recent EU trilogue document seen by The Covered Bond Report.

The Capital Requirements Directive has for several years limited the use of MBS in cover pools, with 2010 amendments reducing the limit from 20% to 10%, but the limit has been accompanied by a periodically extended waiver for self-originated MBS.

The most recent extension of the waiver, which allows unrestricted use of internal MBS, took place in 2010 and runs until the end of 2013.

However, according to a Council of the EU Presidency CRD IV addendum from 13 February that was seen by The CBR last week, the waiver is intended to be prolonged once again, this time until 2017.

A covered bond banker suggested it is time for the derogation to be made permanent so that other issuers with complex legal covered bond set-ups could start structuring programmes without a 2017 deadline “hanging over them like the sword of Damocles”.

As previously reported by The Covered Bond Report (see article here), some Member States were keen to make the waiver permanent but after some intense debate it was agreed to prolong the waiver, but made subject to further review.