Any direct harmonisation of covered bond legislation by the European Commission is unlikely to occur for at least two years, according to the ECBC’s Luca Bertalot, who anyway expects a principles-based approach to be adopted, with the process having been delayed by the UK’s EU referendum.

The issue was raised in a panel discussion at an ICMA Covered Bond Investor Council (CBIC) and The Covered Bond Report conference on 9 June, and Luca Bertalot, secretary general of the EMF-ECBC, said the Commission is taking a gradual approach.

“My expectation it is that it will be very difficult to expect any kind of legislative solution before two or three years,” he said. “But it is anyway my personal expectation that from this will be a series of recommendations that will be disclosed by the European Commission.”

Other panellists at the conference agreed that a principles-based solution is the more likely outcome.

Bertalot noted that the Commission is commissioning a study – yet to be started – on three options outlined in the consultation paper, and that the European Banking Authority is also working on a report analysing the market, which is expected to be completed this year for the European Systemic Risk Board.

“The Commission will analyse all this feedback, and they are going to have a very gradual approach, a very sensitive approach, considering the response of the market – from which there was one big message: ‘be very careful what you are doing’,” he said.

“They are very receptive. There is no decision yet taken on covered bonds.”

Bertalot added that this week’s UK referendum on EU membership has delayed the progress of the harmonisation agenda.

“It is bad luck that this referendum is in the middle of the mandate which was supposed to build the Capital Markets Union, so there was a big slowdown of the whole discussion,” he said. “We have all been distracted by this big debate about Brexit.

“It also does not help the role of Lord Hill, with a British passport, sitting in a very important position in Brussels.”