A draft green paper detailing the EC’s agenda for a capital markets union expands upon previous comments relating to covered bonds, but more clarity on their fate is expected to emerge in May or June in a paper specific to the asset class, while there will next month be a related meeting in Brussels.

Details emerged this week of a European Commission draft green paper that is set to be finalised for publication on 18 February. That will build on and flesh out plans laid out by Jonathan Hill, European Commissioner for Financial Stability, Financial Services and Capital Markets Union, in November and subsequently expanded upon in Commission documents.

The paragraph of the draft green paper dealing with covered bonds adds little detail to previous announcements on their possible integration in the context of helping credit institutions’ access to funding, but highlights disclosure as a potential focus in the context of providing investors with safe and liquid investment opportunities.

“The success of covered bonds as funding instruments is closely linked with the development of dedicated national legal frameworks, but these markets remain largely national,” reads the draft. “The Commission will consult in 2015 on the merits and potential shape of an EU covered bond framework and present a range of policy options to achieve greater integration in covered bond markets. The Commission will also reflect on whether investors should be provided with more information about the collateral underlying covered bonds and other structured debt, similar to loan data disclosure requirements on structured finance instruments.”

A market participant said that although the green paper mentions covered bonds, the asset class will not be a major focus. He said that of more interest to the industry will be a paper specifically dealing with covered bond markets that should emerge in May or June.

In the meantime, on 24 February, there will be a meeting on the plans for covered bonds in a capital markets union between the European Commission and other stakeholders, including issuer representatives of the European Covered Bond Council, investors and representatives of the European Parliament.