Belgium has a new government, to be sworn in this (Tuesday) afternoon, and the country’s banks are hoping that a final draft covered bond legislative proposal can be presented to the Council of Ministers in the coming weeks if not days, according to market participants.

However, one said that expectations are low that a framework will be ready in time to take advantage of the ECB’s second covered bond purchase programme (CBPP2).

A draft legislative text is understood to have been finalised, save for a minor element, with the National Bank of Belgium (NBB) in agreement with the text and in support of the project. A market participant told The Covered Bond Report that industry representatives working on the project yesterday (Monday) sent feedback on an explanatory note to the NBB, and that the aim is for the finance ministry to be presented with a final draft text by the end of the first half of December. Another market participant familiar with the proceedings said that NBB could be ready to send the text to the Council of Ministers in a few days.

Steven Vanackere

The Belgian king, King Albert II, yesterday appointed a new cabinet, which will be headed by Elio Di Rupo, from the Socialist Party, as prime minister. The new finance minister is Steven Vanackere, who also takes on the role of deputy prime minister.

The timeframe for the presentation of a legislative framework to and its potential approval by parliament is unclear, although one market participant had suggested that the covered bond legislation could perhaps be included in a coalition action plan. He said there was no explicit reference to a covered bond legal framework in a governing programme drawn up by the coalition parties, but that statements expressing support, in the context of the Capital Requirement Directive IV, for projects that contribute to liquidity could be seen as implicit reference to covered bonds.

Any covered bonds issued by Belgian banks would be eligible for CBPP2, which the European Central Bank said is expected to be completed by the end of October 2012 at the latest.

A market participant said that CBPP2 has been viewed as an opportunity that may be missed if legislation is not in place in time, while a banker at a Belgian bank said he had the impression that market participants do not expect the framework to be ready in time.