Recent Innovation in the Regulation of Covered Bonds in Europe: Who Will Benefit from the New Legislative Framework?

Covered bonds are debt instruments issued by financial institutions that represent the link between the funding strategies of banks and the capability of originating high-quality assets, which in turn enable cost-efficiently funded lending to the real economy. To date, the regulation of covered bonds has taken place at the national level, resulting in different national approaches regarding key technical issues. The EU (European Union) Parliament and the Council of the European Union have recently harmonised national rules on their issuance by providing common definitions, characteristics and regulations with a view to the use of a European trademark. In this chapter, we intend to explore the new European characteristics of these financial instruments and the possibilities for banks and investors to take advantage of the new regulations.