Most EU jurisdictions are unlikely to hit the 8 July deadline for transposition of the Covered Bond Directive, according to industry sources, with some countries also needing to pick up the pace to be ready 12 months later, when negative consequences would otherwise ensue.

The directive – which was agreed in April 2019 – requires that EU member states transpose it into national law by 8 July.

However, although several countries – led by Germany, which passed an update to the Pfandbrief Act earlier this month – have enacted relevant legislation or are close to doing so, most are not yet ready.

At a meeting of the European Covered Bond Council (ECBC) implementation task force last week, the contrasting preparedness of different countries was highlighted by presentations from the Latvian and Spanish contingents: while the Latvian finance ministry presented new covered bond legislation that was passed by the country’s parliament yesterday (Thursday), a Spanish industry representative made it clear that the country is still at an early stage in updating cédulas.

“The problem that we have is that a lot of countries are still lagging in terms of implementing the covered bond directive,” said one task force member. “You have countries like Germany, Norway and Denmark who are well advanced, and some are in the middle of an ongoing process.

“But others are still at a very early stage and time is running out. They really need to push harder.”

Such countries will nevertheless be able to take advantage of a “buffer” until 8 July 2022, when legislation in line with the directive must come into effect.

“My feeling is that there is some kind of realisation on the government level that there are two deadlines,” said the task force member. “The first one is 8 July 2021, and of course you are required to have the directive transposed into national law, but there is no real downside if you are not ready at that time.

“The hard deadline really is 8 July 2022, because if you miss that deadline, then you are risking that your bonds no longer benefit from the preferential regulatory treatment.”

Dealing with the Covid-19 pandemic is said to have pushed back many countries’ agendas, with the European Commission not expected to take any action against member states who miss this year’s deadline.

Luca Bertalot, secretary general of the European Mortgage Federation-European Covered Bond Council, said the ECBC is ready to support countries in being ready for next year’s deadline.

“In the implementation task force, we are seeing several ministries of finance and central banks coming and sharing their views with us,” he added. “It is very interesting to see that there is a real technical debate in the preparation of the transposition, and we are pleased that our platform is being used for just such purpose.”

Maturity extension triggers are one of the technical aspects of the directive that is among the most challenging, according to Bertalot, and Barclays’ Elena Bortolotti, chair of the rating agency approaches working group, will lead a discussion on the topic at a further meeting next month.

Bortolotti has meanwhile been reproposed as chair of the working group, and Steffen Dahmer as chair of the market-related issues working group, nominations that are expected to be confirmed by the ECBC’s steering committee. Agustín Martin, head of European credit research at BBVA, is expected to take over as chair of the technical issues working group, with Nykredit’s Morten Bækmand Nielsen stepping down – he is ECBC deputy chair, putting him in line to be the next chair of the industry body.

Boudewijn Dierick will meanwhile continue as ECBC chair until the end of his mandate in December 2021, despite having left his position as head of ABS and covered bond structuring at BNP Paribas to join digital-lending platform auxmoney, a move that had led to speculation he might not continue in his role at the industry body.