The AAA Investor Proposals to Lower Covered Bond Risk Weights Rejected

The European Parliament's ECON Committee rejected proposals to lower covered bond risk weights to 5%, though a review clause was added to monitor future market impacts. Despite this regulatory setback, covered bond supply remains strong with YTD issuance significantly outperforming previous years.

Key Takeaways

• 1.The European Parliament's ECON Committee rejected proposals to lower the risk weight for credit quality step 1 covered bonds from 10% to 5%.
• 2.While the immediate risk weight reduction was rejected, a review clause was included to monitor the impact on the covered bond market over the next five years.
• 3.The primary market remains active with EUR benchmark supply up 30% year-on-year to €81.8bn as of end-April.

Table of Contents

• Proposals to lower covered bond risk weights rejected
• Amendment 3
• Amendment 4
• Proposals to lower covered bond capital charges were not adopted...
• ... but the compromise text includes a review clause to monitor the impact of the securitisation package on covered bonds
• Our assessment
• April recap and May supply
• Strong supply in May
• Analyst(s) Certification(s)
• Important Disclosures

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