EBA · 2015_1858 Rejected question

Requirements for financial collateral (Covered Bonds)

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
207, para. 2
Topic
Securitisation and Covered Bonds
Submitted by
Credit institution
Submitted
2015-02-27
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Question

Article 207(2)(2) states that " Securities issued by the obligor, or any related group entity, shall not qualify as eligible collateral. This notwithstanding, the obligor's own issues of covered bonds falling within the terms of Article 129 qualify as eligible collateral when they are posted as collateral for a repurchase transaction, provided that they comply with the condition set out in the first subparagraph ". Whereas the first sentence includes securities issued by " any related group entity ", the second sentence which acts as the carve out, omits such securities. Is this an intended ommission?

Background

Some banks in the EU issue covered bonds through different group entities. It may be a separatelly capitalised mortgage bank which is part of a bank group or a different vehicle entirely which acts as the Issuer but which is still part of the same bank group. Including covered bonds issued by related group entities into the definition of eligible collateral appears logical because if a covered bond qualifies for a repo transaction where the obligor is the Issuer it should also qualify for a repo transaction where the obligor is a different but a related group entity.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2015_1858

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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