A 2% minimum overcollateralisation (OC) level is set to come into effect for Swedish covered bonds on 21 June, after the Swedish FSA (Finansinspektionen) on Friday said that it is proposing to change its regulations at the same time as changes to covered bond legislation that are due to come into effect on that date.

The change will come after the government flagged its plans in September. Covered bonds will in future need to have a minimum OC level of at least 2%, whereas they have hitherto required OC of more than 0%.

The Swedes are making the change to ensure that Swedish covered bonds meet the criteria necessary for exemption from central clearing obligations for OTC derivatives under the European Market Infrastructure Regulation (EMIR), where “legal” OC of 2% is required.

The move has been supported by the Association of Swedish Covered Bond Issuers.