Label aligns with CRR as committee votes for move
The Covered Bond Label Committee has voted to make compliance with the Capital Requirements Regulation (CRR) necessary to qualify for the Label as of 1 January after overcoming resistance to the move.
The Label committee – which is composed of members of the European Covered Bond Council (ECBC) steering committee – took the decision after regulators and investors, who are represented on a Label advisory committee, had indicated they were in favour of the move. At an ECBC plenary meeting in Barcelona in mid-September, for example, such a move was described as “logical” by Ulrich Bindseil, director general, market operations, at the European Central Bank.
However, some members of the committee had indicated at a steering committee meeting ahead of the plenary that they opposed the switch from the current Label requirement that covered bonds be UCITS compliant. Some argued that it was too early for the move, just one year after the Label was launched, while others felt CRR or CRD compliance would be too burdensome – particularly given that the Label is yet to win favourable regulatory treatment – and would also make Label adherents hostage to potentially unwelcome future changes to regulatory requirements.
The latter concern is addressed in the committee’s decision, which only commits to aligning Label eligibility with the CRR until the end of 2014, with qualification criteria due to be reviewed annually.
“For the sake of clarity, the Covered Bond Label Foundation would like to stress that it will maintain its complete independence with regards to any future legislative modifications to the CRR or UCITS Directive,” it said.
The vote in favour of the move was not unanimous, but the announcement noted that the new position was being adopted after a thorough consultation with labelled issuers and wider stakeholders.
“The alignment of the Label Convention with the CRR confirms the strong commitment of the covered bond industry to quality by keeping in line with market and regulatory developments,” said Paul O’Connor, chairman of the European Covered Bond Council.
The decision allows for a phase-in period of up to one year from 1 January 2014 given that national implementation of the CRR will not be completed in time for alignment at the beginning of the year.