The EBA is set to recommend a raft of new criteria covered bonds will have to meet in order to qualify for preferential regulatory treatment, in a submission the Commission will take into account when deciding on harmonisation, according to a presentation for a hearing this Friday.

The European Banking Authority (EBA) has published the presentation ahead of a public hearing on covered bonds it will hold on Friday (18 November) that outlines “recommendations on the harmonisation of the covered bond frameworks in the EU”. It expects to finalise these for publication in December and submission to the European Systemic Risk Board, the Council and the European Commission.

The recommendations as outlined in the Commission reflect comments made at a September European Covered Bond Council plenary by EBA policy advisor Christian Moor.

He highlighted a three-step approach that the presentation confirms will include:

- Development of a covered bond framework with conditions to be met by covered bonds seeking regulatory recognition

- Amendments to CRR, related to preferential risk weight treatment

- Voluntary convergence at national level

A raft of new rules are proposed in the presentation, such as the establishment of conditions that soft bullets and conditional pass-through covered bonds must meet in order to achieve regulatory recognition. Among amendments to CRR is a 5% minimum overcollateralisation level.

The presentation can be found by clicking here.

The CBR will provide further coverage of the EBA’s recommendations in the coming days.