Luxembourg’s parliament passed an amendment to the country’s covered bond legislation yesterday (Tuesday), five months to the day since it was introduced in January, without any significant changes appearing to have been made to what was first proposed.

The draft law was passed by 59 votes to 1. It was introduced by the minister of finance, Luc Frieden, on 11 January, and has since then been favourably reviewed by the chamber of commerce and the state council (Conseil d’État). The chamber of commerce proposed minor amendments of form rather than substance and overall the law that was voted on in the Chambres des Députés yesterday appears to be in line with that proposed by the government in January.

A request for dispensation for a second vote was introduced and is likely to be accepted, leaving promulgation by the Grand Duchy as the next step — essentially a formality.

A major change stemming from the amendment is the introduction of a new type of lettre de gage, co-operative covered bonds, or lettres de gage mutuelles or Verbundpfandbriefe. Changes to insolvency procedures also form part of the amendment, as is an expansion of the jurisdictions from which eligible public sector assets can be drawn.

A move away from the specialist banking principle had at one point been under discussion in Luxembourg, but this was not taken up in the amendments because of concerns about the subordination of unsecured creditors, such as depositors. (See here for previous coverage.)