The European Commission plans to propose in March an EU-wide legal framework for covered bonds to encourage growth in the sector, Reuters reported, citing EC Vice President Valdis Dombrovskis.
Speaking at a conference in Berlin, Dombrovskis said the proposed framework will "specify a common definition to receive an EU covered bond label and benefit from preferential capital treatment," according to the report.
The proposal will build on existing national covered bond frameworks, he said, emphasizing how covered bonds were more in use in certain countries like Germany, "but in other countries they are barely in use."
While the EU wants growth in the covered bond market to be part of its larger capital markets union project, the European Banking Authority has asked for a cautious, three-step approach taking into consideration varying national regulations, Reuters noted.
Members of the European Parliament, meanwhile, have asked for a limited harmonization of regulations to prevent potential disruptions in national markets, according to the report.
