A European Commission official today (Thursday) confirmed that the body is preparing a covered bond consultation paper that it expects to publish in June, although he said that the shape of any proposals is unclear given that there is no consensus on what should be done.

The development of a more integrated European covered bond market is one of the items included in the Commission’s Capital Markets Union (CMU) agenda, according to a green paper released on 18 February, and industry participants had been anticipating a consultation paper being released this summer.

Carlos Echave, policy officer, prudential regulation, at the European Commission, confirmed this plan at an Italian Banking Association (ABI) event in Milan this morning. However, he gave few clues to the likely outcome of the work towards preparing the consultation paper.

According to Echave, a draft is being discussed within the Commission, but he noted that it is a sensitive and political issue, stating that while there is support for action, there is no consensus on what exactly should be done in the future.

He said that policy options range from doing nothing to establishing a “29th Regime” – the latter being an EU-wide covered bond framework that would sit alongside national legislative frameworks. He added that the Commission could draw on elements of a European Banking Authority (EBA) report published in July 2014.

Luca Bertalot, EMF-ECBC secretary general, who spoke on a subsequent panel at the event (pictured), told The CBR that the industry body favours a principles-based approach to harmonisation that strikes a balance between the characteristics of different national markets and key European covered bond market best practices.