The European Covered Bond Council (ECBC) has recently published a Position Paper on the Treatment of Covered Bonds in the Liquidity Coverage Ratios as set out in the European Commission’s proposed Capital Requirements package (CRR/CRD IV).

The ECBC Position Paper introduces both qualitative and quantitative liquidity criteria to support the liquidity of covered bonds. The Paper seeks to provide detailed qualitative input into the metrics that will be assessed by the European Banking Authority, the European Securities and Markets Authority and the European Central Bank when determining the eligibility of assets for Level 1 or Level 2 status, and to present further evidence to support the claim that covered bonds are safe and stable assets with a wide, diverse and growing investor base. As such, the Paper argues that covered bonds should be eligible for inclusion in the Level 1 category of assets alongside government and government related debt.

To read the full text, please see the attached document.