An updated covered bond law was approved by Romania’s president yesterday (Thursday) and is now expected to enter force within 90 days, after the proposed framework was amended to rule that swap counterparties are no longer subordinated to covered bond investors.

National Bank of Romania, Bucharest

Changes to Romania’s Mortgage Bond Law of 2006 were proposed by the Ministry of Finance in April 2014 with the aim of opening up the market for mortgage-backed covered bonds in the country.

The law will now enter into force within 90 days of being passed by the Romanian president. The National Bank of Romania must prepare secondary legislation for the law’s application within the 90 day period.

Among the latest amendments to the covered bond law is a provision that the rights of swap counterparties are ranked equally to the rights of covered bondholders.

Subordination of swap counterparties under a previous draft was an issue raised by the Romanian Banking Association and highlighted in October by Moody’s as a weakness in the proposed framework.

“It is a very positive example of the central bank listening to the concerns of the market,” said a person close to the matter. “The National Bank seem to be on top of this, and we are confident that the result at the end of the 90 days will be a functioning law.

“We don’t expect this to be something that needs more work.”