Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on amending Regulation (EU) No 575/2013 as regards exposures in the form of covered bonds
Date: 2018-03-12
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: bond, capital market, credit institution, financial control, financial legislation, financial supervision, investment company, issue of securities, money-market liquidity, mortgage bank

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 12.3.2018 COM(2018) 93 final 2018/0042 (COD)  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on amending Regulation (EU) No 575/2013 as regards exposures in the form of covered bonds (Text with EEA relevance) {SWD(2018) 50 final} - {SWD(2018) 51 final}  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

The  Commission  has  today  adopted  a  package  of  measures  to  deepen  the  Capital  Markets 
Union together with the Communication "Completing Capital Markets Union by 2019 – time 
to  accelerate  delivery".  The  package  includes  this  proposal,  as  well  as  a  proposal  for  an 
enabling  EU  framework  on  covered  bonds,  a  proposal  to  facilitate  the  cross-border 
distribution  of  investment  funds,  a  proposal  for  an  enabling  framework  on  European 
crowdfunding  service  providers  (ECSP)  for  business,  as  well  as  a  proposal  on  the  law 
applicable  to  the  third-party  effects  of  assignments  of  claims  and  a  Communication  on  the 
applicable law to the proprietary effects of transactions in securities. 

Covered  bonds  are  debt  obligations  issued  by  credit  institutions  and  secured  against  a 
ring-fenced pool of assets to which bondholders have direct recourse as preferred creditors. At 
the  same  time,  bondholders  remain  entitled  to  claim  against  the  issuing  entity  as  ordinary 
creditors. This  double claim against the cover pool  and the issuer is referred to as the ‘dual 
recourse’ mechanism. 

Covered  bonds  are  issued  by  credit  institutions  and  are  as  such  an  important  and  efficient 
source  of funding for European banks. They facilitate the financing of mortgage and public 
sector  loans,  thereby  supporting  lending  more  broadly.  A  significant  advantage  of  covered 
bonds compared with other kinds of bank funding sources such as asset-backed securities is 
the  fact  that  banks  retain  the  risk  on  their  balance  sheets  and  investors  have  claims  directly 
with  the  bank.  Therefore,  covered  bonds  allow  banks  to  lend  not  only  more,  but  also  more 
safely. Not least for that reason, covered bonds fared well during the financial crisis compared 
with  other  funding  instruments.  They  proved  to  be  a  reliable  and  stable  funding  source  for 
European banks at a time when other funding channels were drying up. 

An enabling framework for covered bonds at EU level would enhance their use as a stable and 
cost-effective  source  of  funding  for  credit  institutions,  especially  where  markets  are  less 
developed, in order to help finance the real economy in line with the objectives of the Capital 
Markets Union  (CMU). The enabling framework  would also provide investors with a wider 
and  safer  range  of  investment  opportunities  and  would  help  preserve  financial  stability. 
Member  States  will  have  to  transpose  these  rules,  ensuring  that  national  covered  bond 
frameworks  comply  with  the  principles-based  requirements  set  out  in  this  proposal.  All 
covered  bonds  across  Europe  will  therefore  have  to  respect  the  minimum  harmonisation 
requirements as set out in this proposal. 

The enabling framework for covered bonds is featured in the Commission Work Programme 
for  20181.  In  the  letter  of  intent  following  up  his  latest  State  of  the  Union  speech,  the 
President  of  the  European  Commission  confirmed  that  an  enabling  framework  for  covered 
bonds  should  be  launched  or  completed  by  end-2018  to  ensure  a  deeper  and  fairer  internal 
market.2  The  Commission  confirmed  this  intention  in  the  Mid-Term  Review  of  the  CMU 
Action Plan of June 20173.  

1 
2 

3 

COM(2017) 650. 
European Commission (2017). "State of the Union 2017: Letter of intent to President Antonio Tajani 
and to Prime Minister Jüri Ratas". 
COM(2017) 292. 

EN 

1 

  EN 

                                                 
The  development  of  covered  bonds  across  the  single  market  is  uneven;  they  are  very 
important  in  some  Member  States,  less  so  in  others.  Furthermore,  they  are  only  partially 
addressed  in  Union  law.  While  they  benefit  from  preferential  prudential  and  regulatory 
treatment in various respects in the light of the lower risks (e.g. banks investing in them do 
not have to set aside as much regulatory capital as when they invest in other assets), Union 
law  does  not  comprehensively  address  what  actually  constitutes  a  covered  bond.  Rather, 
preferential  treatments  are  granted  to  covered  bonds  as  defined  in  Directive 2009/65/EC4. 
However,  that  definition  was  drafted  with  a  specific  purpose  in  mind  –  limiting  what 
undertakings for collective investment in transferable securities (UCITS) could invest in – and 
is not fit for the broader policy objectives of the CMU. 

A  Union  legislative  framework  on  covered  bonds  should  expand  the  capacity  of  credit 
institutions  to  provide  financing  to  the  real  economy  and  contribute  to  the  development  of 
covered  bonds  across  the  Union,  particularly  in  Member  States  where  no  market  for  them 
currently exists. 

The  framework  would  also  increase  cross-border  flows  of  capital  and  investment.  It  would 
thus  contribute to  the CMU and in  particular to the further leveraging of credit  institutions’ 
capacity to support the wider economy. In particular, it would ensure that banks have a broad 
range of safe and efficient funding tools at their disposal. 

The framework consists of a Directive and a Regulation – the two instruments should be seen 
as a single package. 

This  proposed  Regulation  will  mainly  amend  Article 129  of  Regulation  (EU)  No 575/2013 
(Capital  Requirements  Regulation  (CRR)).  The  amendments  build  on  the  current  prudential 
treatment  but  add  requirements  on  minimum  overcollateralisation  and  substitution  assets. 
They would strengthen the requirements for covered bonds being granted preferential capital 
treatment.  

The  proposed  Directive  will  specify  the  core  elements  of  covered  bonds  and  provide  a 
common definition as a consistent and sufficiently detailed point of reference for prudential 
regulation purposes, applicable across financial sectors. It will establish the structural features 
of  the  instrument,  a  covered  bond  specific  public  supervision,  rules  allowing  use  of  the 
‘European  Covered  Bonds’  label  and  competent  authorities’  publication  obligations  in  the 
field of covered bonds. 

• 

Consistency with existing policy provisions in the policy area 

The proposal is part of ongoing work to ensure that covered bonds are of sufficient quality to 
justify their continuing preferential treatment. 

It  builds  on  ongoing  work  by  the  European  Banking  Authority  (EBA)  to  identify  best 
practices as regards the issuance of covered bonds5. That work is a response to the European 

4 

5 

Directive  2009/65/EC  of  the  European  Parliament  and  of  the  Council  of  13  July  2009  on  the 
coordination  of  laws,  regulations  and  administrative  provisions  relating  to  undertakings  for  collective 
investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32). 
Report on EU covered bond frameworks and capital treatment, EBA (2014); 
Report  on  covered  bonds  —  recommendations  on  harmonisation  of  covered  bond  frameworks  in  the 
EU, EBA (2016), EBA-Op-2016-23. 

EN 

2 

  EN 

                                                 
 
Systemic Risk Board (ESRB) recommendation that best practices be identified and monitored 
so as to ensure robust and consistent frameworks for covered bonds across the Union6. 

The proposal amends existing legislation, as recommended by the EBA, and renders it fully 
consistent  with  policy  provisions  in  the  field  of  prudential  requirements  for  institutions 
investing in covered bonds. 

• 

Consistency with other Union policies 

One  of  the  Commission’s  most  important  objectives  is  to  stimulate  investment  and  create 
jobs. The Commission has launched a number of initiatives to ensure that the financial system 
contributes  fully  in  that  respect.  First  among  those  is  the  CMU,  which  involves  a  series  of 
initiatives  to  unlock  funding  for  Europe’s  growth.  Covered  bonds  should  be  seen  in  the 
context of the CMU, as bank financing is currently by far the most important funding channel 
in Europe and one of the CMU actions is to leverage banking capacity further in support of 
the  wider  economy.  Covered  bonds  represent  an  efficient  and  stable  funding  tool  for 
European banks. A legislative framework to harmonise covered bonds should be seen in this 
broader policy context. 

Another  important  Commission  objective in  the  realm  of  financial  markets  is  to  ensure that 
capital requirements for banks reflect the risks attached to the assets in their balance sheets. 
Accordingly, the CRR requirements ensure that covered bonds granted the most preferential 
treatment  have  a  uniformly  high  level  of  investor  protection.  However,  because  Union  law 
does  not  comprehensively  address  what  actually  constitutes  a  covered  bond  (see  above), 
harmonisation  is  needed  to  ensure  that  covered  bonds  have  similar  structural  characteristics 
across  the  Union  that  make  them  coherent  with  the  relevant  prudential  requirements.  The 
harmonisation of covered bonds  is therefore in line with  the  Commission’s aim of financial 
stability, as pursued in its regulation of financial markets. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The  proposed  amendment  is  based  on  Article  114  of  the  Treaty  on  the  Functioning  of  the 
European Union, i.e. the same legal basis as the act that is being amended. 

• 

Subsidiarity (for non-exclusive competence)  

As  Union  legislation  grants  preferential  capital  treatment  to  covered  bonds,  the  related 
requirements have to be amended at Union level. Furthermore, it is considered necessary to 
handle the requirements for preferential capital treatment at Union level to ensure a consistent 
degree of investor protection and a level playing-field for European credit institutions. 

• 

Proportionality 

The proposal strikes a balance between ensuring a sufficiently robust framework for covered 
bonds  granted  preferential  treatment  and  avoiding  a  disproportionate  increase  in  the  cost  of 
issuance. In seeking the right balance, the Commission considered all the associated costs and 
potential  benefits  (see  accompanying  impact  assessment).  The  proposal  builds  on  the 
recommendations  from  the  EBA  2016  Report,  but  allows  for  some  limited  deviations  (i.e. 
some provisions are less detailed than foreseen in the EBA report). This is to leave more room 

6 

Recommendation of 20 December 2012 on the funding of credit institutions, European Systemic Risk 
Board (ESRB/2012/2) (2013/C 119/01). 

EN 

3 

  EN 

                                                 
for  protecting  the  existing  well-functioning  national  systems  as  strongly  suggested  by  the 
stakeholders during the consultations and reinforces the proportionality of the proposal. The 
deviations do not involve the core structural features of covered bonds and their supervision. 

The proposal includes provisions on the grandfathering of existing covered bonds in order to 
smooth  costs  for  their  issuers  and  for  markets.  As  the  impact  assessment  shows,  expected 
costs can be deemed proportionate in relation to expected benefits. 

• 

Choice of the instrument 

A regulation is the appropriate instrument, as the provisions replace those in Regulation (EU) 
No 575/2013  concerning  covered  bonds’  eligibility  for  preferential  capital  treatment.  This 
achieves the same direct legal effect as the current Regulation, ensuring that the objectives of 
the proposal are achieved consistently across the Union and contributing to greater certainty 
and a level playing-field for issuers and investors. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

This  initiative  on  covered  bonds  relates  to  an  area,  which  is  very  largely  not  addressed  by 
Union legislation currently. 

• 

Stakeholder consultations 

The Commission consulted stakeholders at several points in the preparation of this proposal, 
in particular by means of:  

i) 

ii) 

an open public consultation on covered bonds (September 2015 to 6 January 2016); 

publication of an inception impact assessment (9 June 2017);  

two meetings of the Expert Group on Banking, Payments and Insurance (EGBPI) and 

iii) 
one meeting of the Financial Services Committee (FSC). 

Under  the  CMU  action  plan,  the  purpose  of  the  public  consultation  was  to  evaluate 
weaknesses and vulnerabilities in national covered bond markets and to assess the merits of a 
European framework. While respondents were concerned that harmonisation based on a ‘one 
size  fits  all’  approach  could  impair  well-functioning  markets  and  reduce  flexibility  and  the 
range  of  products  on  offer,  they  also  expressed  cautious  support  for  targeted  EU  action, 
provided  that  harmonisation  is  principles-based,  builds  on  existing  frameworks  and  takes 
account of the specificities of national markets. The results of the consultation were discussed 
at a public hearing on 1 February 20167. 

The  Commission  received  four  responses  on  the  inception  impact  assessment,  all  of  which 
supported the EU legislative initiative. The respondents addressed specific aspects of national 
frameworks (e.g. liquidity) and confirmed the general view in favour of harmonisation while 
not jeopardising well-functioning national systems. 

At the first EGBPI meeting (9 June 2017), the majority of Member States expressed support 
for a Union covered bond framework based on the EBA’s 2016 advice, provided it remains 
principles-based.  At  the  second  meeting  (28  September  2017),  the  discussion  was  more 

7 

EN 

The 
http://ec.europa.eu/finance/consultations/2015/covered-bonds/index_en.htm  

consultation 

results 

public 

can 

the 

of 

be 

found 

here: 

4 

  EN 

                                                 
detailed, but in  general Member States  still supported a principles-based approach. Member 
States expressed similar views at the FSC meeting in July 2017. 

The proposal also builds on further meetings with stakeholders and EU institutions. In general 
(while  tending  to  focus  on  the  aspect  most  relevant  for  their  situation),  stakeholders 
concentrated  on  balancing  the  need  to  change  the  existing  framework  so  as  to  address 
prudential concerns with the wish to avoid disrupting well-functioning national systems. Input 
focusing on prudential concerns relating to the preferential treatment of covered bonds came 
mainly from the ESRB, the EBA and the European Central Bank, and to some extent from the 
competent  authorities  in  the  Member  States  with  well-developed  covered  bond  markets  and 
from rating agencies, while the focus on well-functioning national markets came mainly from 
Member States with well-developed covered bond markets, from issuers and from investors. 

The  European  Parliament  has  also  expressed  support  for  action,  calling  for  a  European 
legislative framework on covered bonds8. 

• 

Collection and use of expertise 

On  1  July  2014,  the  EBA  issued  a report  identifying  best  practices  with  a  view  to  ensuring 
robust  and  consistent  frameworks  for  covered  bonds  across  the  Union9.  The  report  was  in 
response to a December 2012 ESRB recommendation on the funding of credit institutions10. It 
also set out the EBA’s opinion on the adequacy of the current prudential treatment of covered 
bonds,  following  the  Commission’s  call  for  advice  in  December  2013  on  the  basis  of 
Article 503 CRR11. 

As a follow-up, the ESRB recommended that the EBA monitor the functioning of the covered 
bonds  market  by  reference  to  the  best  practices  it  had  identified  and  called  on  the  EBA  to 
recommend further action if necessary. 

In  response,  the  EBA  issued  a  Report  on  covered  bonds  —  recommendations  on  the 
harmonisation  of  covered  bond  frameworks  in  the  EU  in  December  2016.  This  includes  a 
comprehensive  analysis  of  regulatory  developments  in  covered  bond  frameworks  in 
individual  Member  States,  with  a  particular  focus  on  the  level  of  alignment  with  the  best 
practices  identified  in  the  previous  report.  Building  on  the  results  of  the  analysis,  the  EBA 
called for legislative action to harmonise covered bonds at Union level. 

This proposal builds on the EBA’s analysis and advice. It deviates only in minor areas, e.g. as 
regards  the  level  of  detail  concerning  derivatives  belonging  to  the  cover  pool;  in  the  cover 
pool monitor not being mandatory; and, in the level of overcollateralisation. 

In  August  2016,  the  Commission  had  commissioned  a  study  from  ICF12  to  assess  the 
performance  of  current  covered  bond  markets  and  the  costs  and  benefits  of  potential  EU 
action.  The  study,  which  was  published  in  May  2017,  looked  at  the  potential  benefits  and 
costs  of  the  EBA’s  recommendations.  Overall,  it  concluded  that  the  potential  benefits  of  a 

8 

9 
10 

11 
12 

Resolution  of  4  July  2017  on  the  report  Towards  a  pan-European  covered  bonds  framework 
(2017/2005(INI)). 
Report on EU covered bond frameworks and capital treatment, EBA (2014). 
Recommendation  of  20  December  2012  on  funding  of  credit  institutions,  European  Systemic  Risk 
Board (ESRB/2012/2) (2013/C 119/01). 
Call to EBA for advice on covered bonds capital requirements, ref. Ares(2013) 3780921 (20.12.2013). 
Covered bonds in the European Union: harmonisation of legal frameworks and market behaviours, ICF 
(2017). 

EN 

5 

  EN 

                                                 
legislative  initiative  outweighed  the  potential  costs  and  there  was  therefore  a  case  for 
legislative action. 

In  December  2017,  the  Basel  Committee  on  Banking  Supervision  (BCBS)  finalised  the 
outstanding post-crisis regulatory reforms of the Basel III international regulatory framework 
for banks13. As part of the reforms, the BCBS revised the standardised approach on credit risk 
by including, inter alia, new standards on exposures to covered bonds. For the first time, the 
new standards largely replicate at international level the EU’s approach in the CRR, allowing 
covered bond exposures to benefit from lower risk weights subject to certain conditions. It is 
thus recognised that the EU’s treatment of covered bonds is prudentially viable and justified 
by the underlying characteristics of the instrument. 

• 

Impact assessment 

This  proposal  is  accompanied  by  an  impact  assessment,  which  was  submitted  to  the 
Regulatory Scrutiny Board (RSB) on 6 October 2017 and approved on 17 November 2017 14. 

The RSB commended the comprehensive and well-structured nature of the impact assessment 
and  acknowledged  that  it  applies  its  intervention  logic  systematically  and  contains  a  high 
degree of quantification to substantiate its findings. The RSB recommended that the report be 
improved in some limited respects:  

a) 

the reasons for considering a ‘29th regime’ unattractive; 

and  

b) 
greater  clarity  on  the  main  elements  of  the  ‘minimum  harmonisation’  approach,  and 
whether  (and  how)  they  deviate  from  the  EBA  advice  (Annex  6  has  been  added  for  this 
purpose). 

The impact assessment has been amended accordingly, also addressing additional suggestions 
of the RSB:  

i) 

ii) 

a more detailed explanation concerning the European secured note (ESN);  

a more detailed reasoning of the advantages of issuing covered bonds;  

a  more  thorough  analysis  of  the  impact  of  regulatory  harmonisation  on  cross-border 

iii) 
trade (issuance, investing) in covered bonds; 

iv) 

a discarded option restricted to adjusting the prudential treatment of covered bonds;  

a  more  comprehensive  explanation  of  the  ‘pass-through  effect’  assessed  in  financial 

v) 
literature; and  

vi) 

a table showing the links between monitoring activity and the benchmark benefits. 

The Commission considered a number of policy options for developing covered bond markets 
and  addressing  prudential  concerns.  These  differ  in  terms  of  the  degree  of  harmonisation, 
ranging from a non-regulatory option to options involving full harmonisation, as follows: 

 

 

 

 

13 
14 

Baseline: Do nothing; 

option 1: Non-regulatory option; 

option 2: Minimum harmonisation based on national regimes; 

option 3: Full harmonisation replacing national regimes; and 

Basel III: finalising post-crisis reforms, Basel Committee on Banking Supervision (7.12.2017). 
SWD(2018) 51 and SWD(2018) 50 

EN 

6 

  EN 

                                                 
 

option 4: ‘29th regime’ operating in parallel with national regimes. 

Option 1 (non-regulatory) was considered ineffective in achieving the objectives, as there is 
no  guarantee  that  Member  States  would  follow  the  best  practices.  Option 3  (full 
harmonisation)  would  probably  achieve 
the  objectives,  but  could  disrupt  existing 
well-functioning  markets.  Option 4  (‘29th  regime’  meaning  a  fully  integrated  regime  for 
issuers on a voluntary basis as an alternative to national laws on covered bonds, not requiring 
amendments  to  existing  national  laws)  depends  on  industry  take-up  to  be  effective. 
Consultations  suggest  that  such  take-up  is  unlikely;  this  would  undermine  the  chances  of 
achieving  the  stated  objectives.  Also,  a  parallel  regime  would  contribute  to  further 
fragmentation and duplication of costs. 

The  retained  option  is  option 2  (minimum  harmonisation  based  on  national  regimes).  The 
retained  option  achieves  most  of  the  objectives  of  the  initiative  at  reasonable  cost.  It  also 
balances  the  flexibility  necessary  to  accommodate  Member  States’  specificities  with  the 
uniformity  necessary  for  coherence  at  Union  level.  It  is  likely  to  be  the  most  effective  in 
achieving the objectives, while at the same time being efficient and minimising disruption and 
transition  costs.  It  is  also  one  of  the  more  ambitious  options  in  regulatory  terms,  while 
enjoying the most support from stakeholders. 

Implementing  this  option  would  stimulate  the  development  of  covered  bond  markets  where 
they  do  not exist  or  are underdeveloped.  It  would  also lower  issuers’  funding  costs, help  to 
diversify  the  investor  base,  facilitate  cross-border  investments  and attract  non-EU  investors. 
Overall, it would reduce borrowing costs. 

The option would address prudential concerns, including in relation to market innovation, and 
secure  the  prudential  benefit  of  aligning  the  structural  characteristics  of  the  product  with 
preferential  prudential  treatment  at  Union  level.  It  would  strengthen  the  protection  of 
investors and its credit-enhancing features would reduce their due diligence costs. 

One-off  and  recurrent  direct  administrative  costs  under  the  preferred  option  are  expected  to 
increase  for  issuers  in  low-cost  jurisdictions  (see  impact  assessment).  Costs  would  also 
increase  for  supervisors.  At  the  same  time,  issuers  would  benefit  from  lower  funding  costs 
and  in  turn  citizens  would  enjoy  lower  borrowing  costs.  Costs  would  not  increase  for 
investors, given the lower due diligence costs. 

• 

Regulatory fitness and simplification 

The package on covered bonds, in particular the Directive accompanying this proposal, aims 
at  harmonising  an  area  currently  regulated  mainly  at  national  level.  The  minimum 
harmonisation  in  the  Directive  will  bring  simplification  in  terms  of  basic  alignment  of  core 
elements of national regimes. 

• 

Fundamental rights 

The EU is  committed to high  standards of protection  of fundamental rights.  In  this context, 
the proposal is  not  likely to  have  a  direct impact on those rights,  as  listed in  the Charter  of 
Fundamental Rights of the European Union. 

4. 

BUDGETARY IMPLICATIONS 

The proposal will have no implications for the Union budget. 

EN 

7 

  EN 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The accompanying proposal for a new Directive for covered bonds includes a general plan for 
monitoring developments in covered bond markets, requiring the Commission to carry out an 
evaluation of the Directive in close cooperation with the EBA and at least five years after the 
transposition  deadline,  and  to  report  to  the  European  Parliament,  the  Council  and  the 
European Economic and Social Committee on its main findings.  

The  evaluation  is  to  be  conducted  in  line  with  the  Commission’s  Better  Regulation 
Guidelines.  The  report  is  to  also  cover  the  issuance  of  covered  bonds  in  compliance  with 
Article 129 CRR, developments as regards assets collateralising the issuances, and the level of 
over-collateralisation. 

No  specific  implementation  plans  or  monitoring,  evaluation  and  reporting  arrangements  are 
intended for this proposal. 

• 

Detailed explanation of the specific provisions of the proposal 

Amending Article 129 of Regulation (EU) No 575/2013 

is  amended 

Article  129 
introduce  new  requirements  on  minimum 
overcollateralisation  and  substitution  assets.  Previous  provisions  governing  transparency  are 
moved to the part of the new Directive defining the structural features of covered bonds. 

in  order 

to 

Article 129(1)(d)(ii)  and  (f)(ii)  allows  covered  bonds  to  be  collateralised  by  senior  units 
issued by French Fonds Communs de Titrisation or equivalent entities governed by the laws 
of a Member State that securitise residential or commercial property exposures under certain 
conditions, including the provision that such units do not exceed 10 % of the nominal amount 
of  the  outstanding  issue.  This  possibility  is  repealed,  as  only  a  few  national  covered  bond 
frameworks allow the inclusion of residential or commercial mortgage-backed securities. The 
use  of such  structures is decreasing and is  considered to  add  unnecessary complexity to  the 
covered bond programme. 

Other provisions of Article 129 are maintained. 

Overcollateralisation 

The  proposed  amendments  introduce  a  new  requirement  on  a  minimum  level  of 
overcollateralisation (a level of collateral exceeding the coverage requirements). This level is 
set  at  2  and  5%,  depending  on  the  assets  in  the  cover  pool,  based  on  a  nominal  calculation 
method. This level is in line with the advice of the EBA and with the results of the ICF study. 
While lower than the new Basel standards, it would make the product safer and would raise 
the  level  for  the  majority  of  Member  States  where  the  required  minimum  level  is  currently 
lower. 

Repeal of Article 496 of Regulation (EU) No 575/2013 

Article 496  allows  competent  authorities  to  waive  the  10 %  threshold  referred  to  in 
Article 129(1)(d)(ii) and (f)(ii) for certain covered bonds. 

As Article 129(1)(d)(ii) and (f)(ii) is repealed the possibility to derogate from the threshold is 
unnecessary. Article 496 is therefore repealed. 

EN 

8 

  EN 

2018/0042 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on amending Regulation (EU) No 575/2013 as regards exposures in the form of covered 
bonds 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 114 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Central Bank15, 
Having regard to the opinion of the European Economic and Social Committee16,  
Having regard to the opinion of the Committee of the Regions17,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

15 
16 
17 
18 

19 

Article  129  of  Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the 
Council18  grants,  under  certain  conditions,  preferential  treatment  to  covered  bonds. 
Directive (EU) 20xx/xx [OP: Please insert reference to Directive (EU) 20xx/xx on the 
issue of covered bonds and covered bond public supervision and amending Directive 
2009/65/EU and Directive 2014/59/EU] specifies the core elements of covered bonds 
and provides for a common definition of covered bonds. 

On  20  December  2013  the  Commission  issued  a  call  for  advice  to  the  European 
Banking Authority (EBA) regarding the appropriateness of the risk weights set out in 
Article  129  of  Regulation  (EU)  No  575/2013.  According  to  EBA's  opinion,19  the 
preferential  risk  weight  treatment  laid  down  in  Article  129  of  that  Regulation  is,  in 
principle,  an  appropriate  prudential  treatment.  However,  EBA  recommended  that 
further  consideration  be  given  to  the  opportunity  of  complementing  the  eligibility 
requirements as set out by Article 129 of Regulation (EU) No 575/2013 to cover, at a 
minimum, the areas of liquidity risk mitigation, over-collateralisation, the role of the 

OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 
Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 
648/2012 (OJ L 176, 27.6.2013, p. 1). 
Opinion  of  the  European  Banking  Authority  on  the  preferential  capital  treatment  of  covered  bonds, 
EBA/Op/2014/04. 

EN 

9 

  EN 

                                                 
(3) 

(4) 

(5) 

competent authority, and the further elaboration of existing requirements on disclosure 
to investors20. 

In the light of EBA's opinion, it is appropriate to amend Regulation (EU) No 575/2013 
by  adding  additional  requirements  for  covered  bonds,  thereby  strengthening  the 
quality  of  covered  bonds  eligible  for  favourable  capital  treatment  as  provided  for  in 
Article 129 of that Regulation.  

Pursuant to the third subparagraph of Article 129(1) of Regulation (EU) No 575/2013, 
competent  authorities  may  partially  waive  the  application  of  the  requirement  for 
exposures  to  qualify  for  credit  quality  step  1,  laid  down  in  point  (c)  of  the  first 
subparagraph  of  Article  129(1),  and  allow  an  exposure  which  qualifies  for  credit 
quality step 2 up to a maximum of 10% of the total exposure of the nominal amount of 
outstanding  covered  bonds  of  the  issuing  institution.  Such  a  partial  waiver  however 
applies  only  after  prior  consultation  with  EBA  and  only  provided  that  significant 
potential concentration problems in the Member States concerned can be documented 
as  a  result  of  the  application  of  the  credit  quality  step  1  requirement.  As  the 
requirements  for  exposures  to  qualify  for  credit  quality  step  1  as  made  available  by 
External Credit Assessment Institutions have become increasingly difficult to comply 
with in most Member States both within and outside the euro zone, the application of 
that waiver was considered necessary by those Member States which host the largest 
covered  bonds  markets.  To  simplify  the  use  of  exposures  to  credit  institutions  as 
collateral  for  covered  bonds  and in  order  to  address  that  difficulty,  it  is  necessary to 
amend Article 129(1) of Regulation (EU) No 575/2013. Instead of a possibility for the 
competent  authorities  to  waive  the  requirements,  it  is  appropriate  to  establish  a  rule 
allowing exposures to credit institutions which qualify for credit quality step 2 up to a 
maximum of 10% of the total exposure of the nominal amount of outstanding covered 
bonds of the issuing institution without the need to consult EBA. 

In accordance with points (d)(ii) and (f)(ii) of the first subparagraph of Article 129(1) 
of  Regulation  (EU)  No  575/2013,  loans  secured  by  senior  units  issued  by  French 
Fonds  Communs  de  Titrisation  or  equivalent  securitisation  entities  securitising 
residential or commercial property exposures are eligible assets which can be used as 
collateral for covered bonds up to a maximum of 10 % of the nominal amount of the 
outstanding  issue  of  covered  bonds  (the  '10  %  threshold').  However,  Article  496  of 
that  Regulation  enables  competent  authorities  to  waive  the  10%  threshold.  Lastly, 
Article  503(4)  of  the  same  Regulation  requires  the  Commission  to  review  the 
appropriateness  of  the  derogation  enabling  competent  authorities  to  waive  the  10  % 
threshold.  On  22  December  2013,  the  Commission  requested  EBA  to  provide  an 
opinion in that regard. On 1 July 2014, EBA stated that the use of senior units issued 
by  French  Fonds  Communs  de  Titrisation  or  equivalent  securitisation  entities 
securitising  residential  or  commercial  property  exposures  as  collateral  would  cause 
prudential  concerns  due  to  the  double  layer  structure  of  a  covered  bond  programme 
backed  by  securitisation  units  and  thereby  would  lead  to  insufficient  transparency 
regarding the credit quality of the cover pool. Consequently, EBA recommended that 
the derogation to the 10 % threshold for senior securitisation units currently laid down 
in Article 496 of Regulation (EU) No 575/2013 be removed after 31 December 201721. 

(6) 

Only  a  limited  number  of  national  covered  bond  frameworks  allow  the  inclusion  of 
residential  or  commercial  mortgage-backed  securities.  The  use  of  such  structures  is 

20 
21 

Recommendations EU COM 1-A to 1-D set out in Opinion EBA/Op/2014/04. 
Recommendation EU COM 2 set out in Opinion EBA/Op/2014/04. 

EN 

10 

  EN 

                                                 
(7) 

(8) 

(9) 

decreasing  and  is  considered  to  add  unnecessary  complexity  to  the  covered  bond 
programmes.  It  is  thus  appropriate  to  eliminate  the  use  of  such  structures  as  eligible 
assets altogether. Therefore points (d)(ii) and (f)(ii) of the first subparagraph of Article 
129(1)  of  Regulation  (EU)  No  575/2013,  as  well  as  Article  496  of  that  Regulation 
should be deleted. 

Intragroup  pooled  covered  bond  structures  which  comply  with  Regulation  (EU)  No 
575/2013, have also been used as eligible collateral in accordance with points (d)(ii) 
and  (f)(ii)  of  the  first  subparagraph  of  Article  129(1)  of  that  Regulation.  Intragroup 
pooled  covered  bond  structures  do  not  pose  additional  risks  from  a  prudential 
perspective because they are not raising the same complexity issues as the use of loans 
secured by senior units issued by French Fonds Communs de Titrisation or equivalent 
securitisation  entities  securitising  residential  or  commercial  property  exposures. 
According  to  EBA,  collateralisation  of  covered  bonds  by  pooled  covered  bond 
structures  should  be  allowed  without  limits  related  to  the  amount  of  outstanding 
covered  bonds  of  the  issuing  credit  institution22.  Accordingly,  point  (c)  of  the  first 
subparagraph of Article 129(1) should be amended to remove the requirement to apply 
the limit of 15 % or 10 % in relation to exposures to credit institutions in intragroup 
pooled covered bond structures. Those intragroup pooled covered bond structures are 
regulated  by  Article  9  of  Directive  (EU)  20../….  [OP:  Please  insert  reference  to 
Directive (EU) on the issue of covered bonds and covered bond public supervision and 
amending Directive 2009/65/EC and Directive 2014/59/EU]. 

Article 129(3) of Regulation (EU) No 575/2013 requires that the valuation principles 
for immovable property collateralising covered bonds, set out in Article 229(1) of that 
Regulation,  be  applied  to  covered  bonds  in  order  for  those  bonds  to  meet  the 
requirements  for  preferential  treatment.  The  requirements  on  eligibility  of  assets 
serving as collateral for covered bonds relate to the general quality features ensuring 
the  robustness  of  the  cover  pool  and  should  therefore  be  subject  to  Directive  (EU) 
20../…  [OP:  Please  insert reference to  Directive  (EU)  on  the  issue  of  covered  bonds 
and  covered  bond  public  supervision  and  amending  Directive  2009/65/EC  and 
Directive 2014/59/EU]. Accordingly, the provisions on valuation methodology should 
also  be  subject  to  that  Directive.  The  regulatory  technical  standards  mandated  by 
Article  124(4)(a)  of  Regulation  (EU)  No  575/2013  should  therefore  not  apply  in 
respect  of  the  eligibility  criteria  for  covered  bonds  as  set  out  in  Article  129  of  that 
Regulation. It is therefore necessary to amend Article 129(3) of that Regulation to that 
effect. 

Limits for Loan-To-Value ('LTV') are a necessary part of ensuring the credit quality of 
the  covered  bonds.  Article  129(1)  of  Regulation  (EU)  No  575/2013  establishes  the 
LTV limits for mortgage and ship assets but does not specify how those limits are to 
be  applied which  may  lead to  uncertainty.  The  LTV  limits  should  be  applied  as  soft 
coverage  limits,  meaning  that  while  there  are  no  limits  to  the  size  of  an  underlying 
loan,  such  a  loan  can  only  act  as  collateral  within  the  LTV  limits  imposed  on  the 
assets. The LTV limits determine the percentage portion of the loan that contributes to 
the requirement of coverage of the liabilities. It is therefore appropriate to specify that 
the  LTV  limits  apply  to  the  portion  of  the  loan  contributing  to  the  coverage  of  the 
covered bond.  

(10)  To ensure greater clarity, it should also be specified that the LTV limits are applicable 
throughout  the  entire  maturity  of  the  loan.  The  actual  LTV  should  not  change  but 

22 

Ibid. 

EN 

11 

  EN 

                                                 
(11) 

remain at the limit of 80% of the value of the property for residential loans, and at the 
limit of 60% of the value of the property for commercial loans and ships. 

In  order  to  further  enhance  the  quality  of  the  covered  bonds  that  receive  the 
preferential  capital  treatment  as  provided  for  in  Article  129  of  Regulation  (EU)  No 
575/2013,  that  preferential  treatment  should  be  subject  to  a  minimum  level  of 
overcollateralisation,  meaning  a 
the  coverage 
requirements as referred to in Article 15 of Directive (EU) 20../…  [OP: Please insert 
reference  to  Directive  (EU)  on  the  issue  of  covered  bonds  and  covered  bond  public 
supervision  and  amending  Directive  2009/65/EC  and  Directive  2014/59/EU].  Such  a 
requirement serves the purpose of mitigating the most relevant risks arising in case of 
the issuer’s insolvency or resolution.  

level  of  collateral  exceeding 

(12)  One of the requirements laid down in Article 129(7) of Regulation (EU) No 575/2013 
is that the credit institution investing in covered bonds receives certain information on 
the covered bonds on at least a semi-annual basis. Transparency requirements are an 
indispensable part of covered bonds ensuring a uniform disclosure level and allowing 
investors  to  perform  the  necessary  risk  assessment,  enhancing  comparability, 
transparency  and  market  stability.  Therefore,  it  is  appropriate  to  ensure  that 
transparency requirements apply to all covered bonds which can be achieved by laying 
down  those  requirements  in  Directive  (EU)  20../…  [OP:  Please  insert  reference  to 
Directive (EU) on the issue of covered bonds and covered bond public supervision and 
amending  Directive  2009/65/EC  and  Directive  2014/59/EU]  as  common  structural 
feature  of  covered  bonds.  Accordingly,  Article  129(7)  of  Regulation  (EU)  No 
575/2013 should be deleted. 

(13)  Covered  bonds  are  long  term  funding  instruments  and  therefore  issued  with  a 
scheduled  maturity  of  several  years.  It  is  therefore  necessary  to  ensure  that  covered 
bonds  issued  before  31  December  2007  or  before  [OP:  Please  insert  the  date  of 
application  of  this  Regulation]  are  not  disrupted.  In  order  to  achieve  that  objective, 
covered  bonds  issued  before  31  December  2007  should  remain  exempted  from  the 
requirements set out in Regulation (EU) No 575/2013 with respect to eligible assets, 
overcollateralisation  and  substitution  assets.  In  addition,  other  covered  bonds 
complying with Article 129 of Regulation (EU) No 575/2013 and issued before [OP: 
Please insert the date of application of this Regulation] should be exempted from the 
requirements on overcollateralisation and substitution assets and should continue to be 
eligible for the preferential treatment as set out in that Regulation until their maturity.  

(14)  This Regulation should be applied in conjunction with [OP: Please insert reference to 
Directive (EU) on the issue of covered bonds and covered bond public supervision and 
amending  Directive  2009/65/EC  and  Directive  2014/59/EU].  In  order  to  ensure  the 
consistent application of the new framework establishing the structural features of the 
issue  of  covered  bonds  and  the  amended  requirements  for  preferential  treatment,  the 
application of this Regulation should be deferred to coincide with the date from which 
Member States are to apply the provisions transposing that Directive. 

(15)  Regulation (EU) No 575/2013 should therefore be amended accordingly. 

EN 

12 

  EN 

 
 
HAVE ADOPTED THIS REGULATION: 

Article 1 
Amendments to Regulation (EU) No 575/2013 

Regulation (EU) No 575/2013 is amended as follows: 

1. 

Article 129 is amended as follows: 

(a) paragraph 1 is amended as follows: 

(i) 

― 

the first subparagraph is amended as follows: 

the introductory phrase is replaced by the following: 

"To be eligible for the preferential treatment set out in paragraphs 4 and 5, covered bonds, as 
referred to  in Article 2 of Directive (EU) 20xx/xxxx  of the European Parliament and of the 
Council*[OP:  Please  insert  reference  to  Directive  (EU)  on  the  issue  of  covered  bonds  and 
covered  bond  public  supervision  and  amending  Directive  2009/65/EC  and  Directive 
2014/59/EU],  shall  meet  the requirements  set  out  in  paragraphs  3,  3a  and  3b  of  this  Article 
and shall be collateralised by any of the following eligible assets: 

______________________________ 

* 
[OP, please insert a reference to Directive (EU) 20xx/xx of the European Parliament 
and  of  the  Council  on  the  issue  of  covered  bonds  and  covered  bond  public  supervision  and 
amending Directive 2009/65/EU and Directive 2014/59/EU (OJ C […], […], p. […])]."; 

― 

point (c) is replaced by the following: 

"(c) exposures to credit institutions that qualify for the credit quality step 1 or credit quality 
step 2 as set out in this Chapter."; 

― 

― 

in point (d), point (ii) is deleted;  

in point (f), point (ii) is deleted; 

(ii) 

the second subparagraph is replaced by the following: 

"For the purposes of point (c) of the first subparagraph, exposures caused by transmission and 
management  of  payments  of  the  obligors  of,  or  liquidation  proceeds  in  respect  of,  loans 
secured by pledged properties of the senior units or debt securities shall not be comprised in 
calculating the limits referred to in those points."; 

(iii) 

the third subparagraph is deleted; 

(b) the following paragraphs 1a, 1b and 1c are inserted: 

"1a. For the purposes of point (c) of the first subparagraph of paragraph 1, the following shall 
apply: 

(a)  for  exposures  to  credit  institutions  that  qualify  for  the  credit  quality step  1 the  exposure 
shall  not  exceed  15  %  of  the  nominal  amount  of  outstanding  covered  bonds  of  the  issuing 
credit institution; 

(b) for exposures  to  credit  institutions that  qualify for the credit  quality step 2 the exposure 
shall  not  exceed  10  %  of  the  total  exposure  of  the  nominal  amount  of  outstanding  covered 
bonds of the issuing credit institution; 

(c) the total exposure to credit institutions that qualify for the credit quality step 1 or the credit 
quality  step  2  shall  not  exceed  15  %  of  the  total  exposure  of  the  nominal  amount  of 
outstanding covered bonds of the issuing credit institution. 

EN 

13 

  EN 

This paragraph shall not apply to the use of covered bonds as eligible collateral as permitted 
pursuant  to  Article  9  of  Directive  (EU)  20xx/xxxx  [OP:  Please  insert reference to  Directive 
(EU)  on  the  issue  of  covered  bonds  and  covered  bond  public  supervision  and  amending 
Directive 2009/65/EC and Directive 2014/59/EU]. 

1b. For the purposes of point (d)(i) of the first subparagraph of paragraph 1, the limit of 80 % 
shall refer to the portion of the loan contributing to the coverage of liabilities attached to the 
covered bond and be applicable throughout the entire maturity of the loan. 

1c. For the purposes of point (f)(i) and point (g) of the first subparagraph of paragraph 1, the 
limit of 60 % shall refer to the portion of the loan contributing to the coverage of liabilities 
attached to the covered bond and be applicable throughout the entire maturity of the loan."; 

(c) 

paragraph 3 is replaced by the following: 

"3. For immovable property collateralising covered bonds compliant with this Regulation, the 
requirements set out in Article 208 shall be met."; 

(d) 

the following paragraphs 3a and 3b are inserted:  

"3a.  In  addition  to  being  collateralised  by  the  eligible  assets  listed  in  paragraph  1,  covered 
bonds shall be subject to a minimum level of 5 % of overcollateralisation as defined in Article 
3(12) of Directive (EU) 20xx/xxx [OP: Please insert reference to Directive (EU) on the issue 
of covered bonds and covered bond public supervision and amending Directive 2009/65/EC 
and Directive 2014/59/EU]. 

For the purposes of the first subparagraph, the total nominal amount of all assets in the cover 
pool  shall be  at least of the same value as the total  nominal  amount  of  outstanding covered 
bonds ('nominal principle') and consist of eligible assets as set out in paragraph 1.  

The assets contributing to a minimum level of overcollateralisation shall not be subject to the 
limits on exposure size as set out in points (b) and (c) of the first subparagraph of paragraph 1 
and shall not count towards those limits. 

Competent authorities designated pursuant to Article 18(2) of Directive (EU) 20xx/xxx [OP: 
Please  insert  reference  to  Directive  (EU)  on  the  issue  of  covered  bonds  and  covered  bond 
public  supervision  and  amending  Directive  2009/65/EC  and  Directive  2014/59/EU]  may 
decide to apply a lower minimum level of overcollateralisation to covered bonds provided that 
the following conditions are met: 

(a) the calculation of overcollateralisation is either based on a model which takes into account 
the assigned risk weights of the assets or a model where the valuation of the assets is subject 
to mortgage lending value as defined in Article 4(1)(74); 

(b) the minimum level of overcollateralisation cannot be lower than 2 % based on the nominal 
principle. 

3b. Eligible assets referred to in paragraph 1 may be included in the cover pool as substitution 
assets as defined in Article 3(11) of Directive (EU) 20xx/xxx [OP: Please insert reference to 
Directive  (EU)  on  the  issue  of  covered  bonds  and  covered  bond  public  supervision  and 
amending Directive 2009/65/EC and Directive 2014/59/EU] for the primary assets as defined 
in Article 3(10) of that Directive, subject to the limits on credit quality and exposure size as 
set out in paragraph 1 of this Article."; 

(e) paragraphs 6 and 7 are replaced by the following: 

EN 

14 

  EN 

"6. Covered bonds issued before 31 December 2007 shall not be subject to the requirements 
of  paragraphs  1,  3,  3a  and  3b.  They  shall  be  eligible  for  the  preferential  treatment  under 
paragraphs 4 and 5 until their maturity. 

7.  Covered  bonds  issued  before  [OP  please  insert  the  date  of  application  of  this  amending 
Regulation] shall not be subject to the requirements of paragraphs 3a and 3b. They shall be 
eligible for the preferential treatment under paragraphs 4 and 5 until their maturity."  

(2) 

in point (a) of Article 416(2), point (ii) is replaced by the following: 

"(ii) they are bonds as referred to in Article 2 of Directive (EU) 20xx/xxxx [OP: Please insert 
reference  to  Directive  (EU)  on  the  issue  of  covered  bonds  and  covered  bond  public 
supervision and amending Directive 2009/65/EU and Directive 2014/59/EU] other than those 
referred to in point (i) of this point;"; 

(3) 

in Article 425, paragraph 1 is replaced by the following: 

"1.  Institutions  shall  report  their  liquidity  inflows.  Capped  liquidity  inflows  shall  be  the 
liquidity  inflows  limited  to  75  %  of  liquidity  outflows.  Institutions  may  exempt  liquidity 
inflows from deposits placed with other institutions and qualifying for the treatments set out 
in Article 113(6) or (7) from this limit. Institutions may exempt liquidity inflows from monies 
due from borrowers and bond investors related to mortgage lending funded by bonds eligible 
for  the  treatment  set  out  in  Article  129(4),  (5)  or  (6)  or  by  covered  bonds  as  referred  to  in 
Article 2 of Directive (EU) 20xx/xxxx [OP: Please insert reference to Directive (EU) on the 
issue  of  covered  bonds  and  covered  bond  public  supervision  and  amending  Directive 
2009/65/EU and Directive 2014/59/EU] from this limit. Institutions may exempt inflows from 
promotional loans that the institutions have passed through. Subject to the prior approval of 
the competent authority responsible for supervision on an individual basis, the institution may 
fully or partially exempt inflows where the provider is a parent or a subsidiary institution of 
the institution or another subsidiary of the same parent institution or linked to the institution 
by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC."; 

(4) 

in point (b) of Article 427(1), point (x) is replaced by the following: 

"(x)  liabilities resulting from securities issued qualifying for the treatment set out  in Article 
129(4)  or  (5)  or  as  referred  to  in  Article  2  of  Directive  (EU)  20xx/xxxx  [OP:  Please  insert 
reference  to  Directive  (EU)  on  the  issue  of  covered  bonds  and  covered  bond  public 
supervision and amending Directive 2009/65/EU and Directive 2014/59/EU];"; 

(5) 

in point (h) of Article 428(1), point (iii) is replaced by the following: 

"(iii)  match  funded  (pass-through)  via  bonds  eligible  for  the  treatment  set  out  in  Article 
129(4) or (5) or via bonds as referred to in Article 2 of Directive (EU) 20xx/xxxx [OP: Please 
insert  reference  to  Directive  (EU)  on  the  issue  of  covered  bonds  and  covered  bond  public 
supervision amending Directive 2009/65/EU and Directive 2014/59/EU];"; 

(6) 

(7) 

Article 496 is deleted; 

in point 6 of ANNEX III, point (c) is replaced by the following: 

"(c)  they  are  covered  bonds  as  referred  to  in  Article  2  of  Directive  (EU)  20xx/xxxx[OP: 
Please  insert  reference  to  Directive  (EU)  on  the  issue  of  covered  bonds  and  covered  bond 
public supervision and amending Directive 2009/65/EU and Directive 2014/59/EU] other than 
those referred to in point (b) of this point.". 

EN 

15 

  EN 

Article 2 
Entry into force and application 

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

It shall apply from [date from which Member States are to apply the provisions  transposing 
Directive (EU) …/… on the issue of covered bonds and covered bond public supervision and 
amending Directive 2009/65/EU and Directive 2014/59/EU]. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

EN 

16 

  EN