Let me start by thanking and congratulating our rapporteur. He has presented a very good report.
And in the run up to it, he organized some very useful meetings with stakeholders that I found interesting.
As has already been said, covered bonds are a financial intrument that have already proved themselves over centuries in some of our European markets. They have provided robust and flexible methods for raising finance that have benefitted both issuers and investors in a reasonably transparent framework.
This has up to now been done in the context of national markets, with some like Denmark and Germany where they are considered as vital investment tools.
So placed before the proposal to regulate cover bonds on a European basis via a Directive, one legitimate reaction could be the same as that of President Jimmy Carter’s director of the Office of Management and Budget: What ain’t broke, don’t fix.
At least three factors though seem to favour the proposal that is now in the works, for the Commission to draft a Directive defining covered bonds on a European basis and to set the framework for their regulation, Europe wide.
First, in the moves towards a capital market union, it would be inconceivable not to allow space for covered bonds. The capital markets union does not have to be seamless, nor does it have to apply on one size fits all basis.
But it cannot have significant gaps in its structure, which there would be if covered bonds are not included in its purview.
Secondly, I think that many stakeholders are in favour of such a directive, that would establish a European identity for covered bonds, so long as it takes due and full recognition of long standing national practice that has given good results.
This comes out in the consultations that the Commission has been conducting and was also reflected in the meetings with stakeholders organised by the rapporteur, as well as in other bilateral meetings I had separately.
Thirdly, the point has been made that a European Directive in force would be benefit member states that do not now have a market in covered bonds or where bond issues are still thin and underdeveloped.
Such countries would have a template for the setting up of regulatory and promotional initiatives.
However, while we seem to be on the right track, certain precautionary constraints had better be kept in mind, and they have already been mentioned ion today’s meeting.
The Directive had better be light touch in approach and not force too many details that would apply across different national markets. All involved seem to agree that it has to be a principles-based approach. I agree with this.
Yet it was also said that attention must be kept not to water down the “covered bond” label; its definition must be strict and clear enough to preserve the brand identity of existing and forthcoming issues.
Another interesting issue that has been raised refers to the kind of assets that should be allowable for securing the “covered bond” label.
All these matters are covered in the draft report before us as well as in the explanatory statement. On some of the technical aspects, I would still remain cautious and I would like to listen a bit more to stakeholders. For instance, I’m still not convinced that the suggestion in the draft to introduce a new instrument in parallel with covered bonds to be called “European secured notes” can fly. Or whether it is appropriate to have a strict maturity structure.
All in all, I think we have a good to very good basis for further analysis and discussion. Again I congratulate our rapporteur for his very good work and look forward to the finalisation of the report in coming weeks.