France is introducing changes to two of its covered bond legal frameworks, including higher minimum overcollateralisation and a limit on issuers’ exposure to their parent banking groups, as part of a move to bolster the standalone strength of obligations foncières and obligations de financement de l’habitat and their issuers.

The changes were announced by François Haas of the Banque de France at a plenary of the European Covered Bond Council (ECBC) in Paris today (Thursday), with some further details provided by an official from the French ministry for the economy and finance official on a subsequent panel at the industry event.

The main amendments are an increase in legal minimum overcollateralisation from 102% to 105%, a limit on maturity mismatches between covered bonds and the assets backing them, and a limit on issuers’ exposure to their parents groups [further detail on the latter has been removed from this article subject to clarification].

The changes are due to be implemented by the government by the summer and are aimed at strengthening obligations foncières (OF) and obligations de financement de l’habitat (OH) to make them and their issuers more robust on a standalone basis.

The French ministry for the economy and finance official said that the government wants to protect the French covered bond market and product, and to limit if not avoid state support.

Haas at Banque de France said the changes represented an “evolution” toward higher standards rather than a “big bang”, and will help preserve the business model of French covered bond issuers.

OFs and OHs are two of the law-based covered bonds issued in France, with covered bonds issued by Caisse de Refinancement de l’Habitat (CRH) the third type.