Non-EEA covered bonds that are LCR-eligible will be able to qualify for the Covered Bond Label, the European Covered Bond Council announced today (Wednesday), while the transparency element will be tightened up for 2015. SME funding is separately a topic on the ECBC’s agenda.

Speaking at an ECBC plenary at the Hotel Savoyen (pictured) in Vienna, Carsten Tirsbæk Madsen, chairman of the ECBC and CEO of BRFkredit, said that in the context of developing covered bond markets in new regions beyond the European Economic Area (EAA), the Label Committee has decided to allow to be eligible for the Label non-EEA covered bonds that are nevertheless compliant with Liquidity Coverage Ratio requirements.

The move was welcomed by Wojciech Zielonka, senior vice president, capital markets, at Canada Mortgage & Housing Corporation (CMHC), which administers the Canadian covered bond framework. He said it is important to make sure that there is a level playing field.

Zielonka noted that there is still a concern around divergence from the FSB’s principles with regards to LCRs, for example, although he noted that the latest iteration of EU requirements were an improvement upon earlier drafts that had been discriminatory to non-EEA covered bonds. He said that covered bonds are “no longer just a European product” and that long term thinking regarding the global nature of the product was necessary.

The ECBC is also tightening the transparency requirement of the Label for 2015. Covered bonds have to be UCITS and CRR-compliant under the prevailing Label requirements, which implies compliance with CRR transparency requirements, but from 1 January national co-ordinators will have to ensure that national transparency templates are “fully aligned” with Article 129 (7) of CRR.

Luca Bertalot, secretary general of the EMF-ECBC, said that Article 129 (7) will be one of the key drivers of harmonisation and transparency under LCRs and wider regulation going forward.

Madsen added that the ECBC intends to invite to a dialogue on transparency the ICMA Covered Bond Investor Council, which has been lobbying for greater disclosure and has produced its own transparency templates.

Away from the label, the industry body will also consider what covered bonds can contribute to helping finance small and medium-sized enterprises (SMEs).

“It is also important to highlight the essential role played by an efficient long term funding system in the wide picture,” said Madsen. “We will therefore in the coming months look closer into SME funding, not because we see this solved by traditional covered bonds, but maybe with covered bond techniques and structures.”