The introduction of pan-European covered bond legislation that could compete with national laws is one option that the European Commission could consider as it addresses harmonisation after in July receiving an EBA report that addressed the topic, according to an EC official.

Speaking at a DZ capital markets conference yesterday, Miguel de la Mano, head of economic analysis of financial markets at DG Internal Market, said that the Commission has three options open to it.

One is doing nothing and leaving the covered bond market as it is, said de la Mano, with competition between jurisdictions possibly raising standards. A second option he highlighted – and which has been the focus of much debate among market participants – is the introduction of minimum standards in line the best practices outlined by the European Banking Authority (EBA) in its report.

A third option raised by de la Mano is the introduction of pan-European covered bond legislation by the Commission that would run alongside national legislations, leaving issuers with the option of operating under the European or local legislation – an option referred to by de la Mano as the “28th regime”, with Europe-wide legislation being thus dubbed in Brussels because it comes in addition to legislations of the Member States (although these now themselves number 28). [Amended to correct and clarify the development of the term.]

De la Mano said that this “is a possibility”, although he added that it would “not happen from one day to the next”.

His comments came after he outlined the Commission’s thinking surrounding Liquidity Coverage Requirements rules, which were expected to have been announced by the end of September but which had not been revealed by the last day of the month, yesterday.