A 2018 update of the HTT incorporating enhancements to satisfy ECB rating disclosure requirements was agreed last week, and the ECBC/Label Foundation has moved to address concerns about unsatisfactory disclosure from some issuers not long before the new regime kicks in.

Additions to the Harmonised Transparency Template (HTT) were already flagged at a European Covered Bond Council (ECBC) plenary in April after the European Central Bank in November 2016 said it would be introducing minimum disclosure requirements for repoed covered bonds – a move that came too late to be reflected in the 2017 HTT update, but which were discussed ahead of the 2018 update to give issuers more time to prepare, according to Covered Bond Label administrator and EMF-ECBC secretary general Luca Bertalot.

The formal adoption of broadly unchanged rating agency-related enhancements by the Covered Bond Label Foundation last Tuesday comes some 10 weeks ahead of the ECB requirements kicking in on 25 November – rating agencies have to release relevant data eight weeks after the end of the respective quarter, with the third quarter being that for which the requirement comes into force.

Earlier on Tuesday, Fitch had said that – based on second quarter data it had received – covered bond disclosure is not yet fully compliant with the ECB rules. Data was received on time for 102 out of 112 programmes it publicly rates – an improvement on 97 in the previous quarter – while three were late due for technical reasons, three were non-ECB eligible, and one was for a newly-established programme with no covered bonds outstanding. Data for 11 out of 15 multi-issuer cédulas hipotecarias was on time, compared with nine in the previous quarter.

Furthermore, according to Fitch, the data content often did not fully match the list required by the ECB, with an average of 17% of all required items missing for the 102 punctual programmes, and almost half of issuers reporting via the HTT not yet filling out the optional rating agency worksheet designed to reflect the ECB requirements.

“The agency is committed to interacting with issuers to discuss issues preventing an adequate publication,” the rating agency said. “Nonetheless, market participants should be aware that issuance currently eligible as covered bonds for the Eurosystem’s framework may be deemed ineligible in the future if timeliness and content of reporting is not improved further.”

Commerzbank analysts meanwhile on 6 September said that “issuers’ voluntary self-commitment under the Label in this regard is not yet achieving the desired results across the board”, highlighting that two Spanish banks had either not used the HTT or not posted up-to-date HTT data, despite having committed to do so.

At an ECBC plenary in Barcelona on Wednesday, Bertalot said that the industry body is implementing processes to ease compliance.

“The frequency of disclosure is essentially for the rating agencies to be compliant with the ECB requirements, so we have re-invited all our issuers to have a timely disclosure of data before the eight weeks,” he said. “We have also adapted the website to try to give more visibility to the good guys – those implementing the HTT immediately get better visibility in the Covered Bond Label.

“And yesterday the Label Committee decided to put in place on the Label website an automatic system of alerts which will alert the issuer that their HTT is about to expire. And before the eight weeks they have the obligation to upload the disclosure, otherwise this will be visible as non-refreshed HTT on the website.”

A means to report missing information has also been added to the Label website and Bertalot reminded plenary delegates of the ultimate sanction available.

“Every market participant – analysts, investors, authorities – can make a notification to the secretariat that something is not correct,” he said. “We receive a mail, we contact the issuer immediately, and we ask them to fix the problem.

“If they do not, we have to report to the Label committee, and then the Label committee will discuss with the issuer, and if it is not enough and it is not fixed they will create a withdrawal panel and they can take a decision on withdrawing that Label.”

He stressed that the Label and HTT are market initiatives.

“Is the Covered Bond Label the perfect instrument? No,” said Bertalot. “We are trying to guide the market to a better disclosure level.

“We try to digest what comes from outside the ECBC, and try to implement market solutions.”

He also highlighted the extent of take-up of the Label, with 110 programmes covered, taking in 93 issuers and 16 countries, and Eu1.5tr of issuance.