The ECBC marked the transition to the next phase of the EU covered bond harmonisation project at a plenary yesterday (Wednesday), with the announcement of an implementation taskforce chaired by HSBC’s Frank Will, following parliamentary approval of the legislative package last week.

The European Parliament confirmed political agreement around the Directive and Regulation last Thursday, and European Commission vice president Valdis Dombrovskis (pictured) on Tuesday evening welcomed the adoption of the legislative package at a European Covered Bond Council (ECBC) dinner in his home town of Riga, where the plenary was held.

“The aim of this proposal is clear: to establish a pan-European market for covered bonds, based on high quality standards and best practices,” he said.

“This will help develop this asset as a stable and cost-effective funding source for EU banks, especially where markets are less developed. It will also set the standard for covered bonds globally.”

Opening the plenary the next morning, ECBC chairman Niek Allon, of NIBC, said the development was a “truly historic moment for our sector”, noting that it coincided with the celebration of 250 years of Pfandbriefe.

He said the industry now envisages the implementation period running from the third or fourth quarter of this year until final entry into full force in the second or third quarter of 2022. To help accommodate the transition to the new regime, the ECBC steering committee is establishing an implementation taskforce, led by HSBC head of covered bond research Frank Will and supervised by the steering committee.

The taskforce will not only focus on Europe, but will seek to coordinate ideas and practical solutions stemming from the implementation of the Directive at a global level, said Allon. The increasingly global nature of the market was highlighted the day before the plenary, with news that the ECBC had welcomed its first Japanese member, Sumitomo Mitsui Banking Corporation (SMBC), which sold the first covered bond from the Asian jurisdiction in October.

“Together with the support from the ECBC, Sumitomo Mitsui Banking Corporation would like to contribute to the development of the Japanese covered bond market, which is backed by a $1.6 trillion mortgage market,” said SMBC’s Atsushi Ouchiyama.

The Covered Bond Label Committee will meanwhile work to make the Label website and Harmonised Transparency Template (HTT) “Directive-proof”.

“Going forward, the Label will be open to covered bonds with non-traditional assets,” said Allon, “or as they are named in the Directive, European Covered Bonds.”

He said that within the next couple of weeks the Label website will show, for example, whether a covered bond qualifies as Premium, EU or non-EU.

The designation of Premium covered bonds was one of the last parts of the legislative package to be agreed on and ECBC secretary general Luca Bertalot highlighted the compromise that had been necessary during the negotiations, saying that before the harmonisation process began each jurisdiction was convinced that its covered bonds were the best.

Speaking at the first ECBC plenary to be held in central and eastern Europe, Charlotte Ruhe, managing director, central and south-eastern Europe, at the European Bank for Reconstruction & Development (EBRD), said a comment she had heard in Riga summed up the way forward for the industry: “If you want to go fast, go alone. But if you want to go far, go together.”

Work towards a pan-Baltic covered bond market that could see the first Estonian issue by year-end was held up as an example of this spirit.

Further projects highlighted by Bertalot included SME financing – including work on European Secured Notes (ESNs) – and energy efficiency – under the EeMAP initiative.

“What has been approved last week in Strasbourg is just the past,” he said. “Now we are here today to discuss the future and all of you have a responsibility to play a role in finding solutions.”