European Banking Authority advises the European Commission on covered bond framework review and recommends tighter harmonisation and a third-country equivalence regime

The European Banking Authority published its advice to the European Commission’s Call for Advice on the review and performance of the EU covered bond framework. It concludes that the framework is broadly fit for purpose, while proposing targeted changes to reduce fragmentation, strengthen investor protections, improve legal clarity and transparency, and expand the EU covered bond ecosystem. The assessment responds to the Commission’s request to examine the framework’s performance, the relevance and design of a potential third-country equivalence regime, the feasibility of a dual recourse-like instrument to support SME financing, and the role of green covered bonds and ESG risks in cover pools. Key recommendations include further aligning national covered bond regimes while preserving the principle-based approach of the Covered Bond Directive, strengthening safeguards and transparency across national frameworks, streamlining the EU legal framework by aligning the Covered Bond Directive more closely with the Capital Requirements Regulation, and introducing a third-country equivalence regime. Under Article 31 of the Covered Bond Directive, the review process foresees that the Commission tasked the EBA to prepare the report in July 2023, with the analysis developed in collaboration with national competent authorities, and sets 8 July 2025 as the deadline for the Commission to submit the outcome to the European Parliament and the European Council.