‘Covered Bonds Directive avoids risk of disruption of well-functioning national covered bonds systems’

Alfred SANT in the EP in Strasbourg

Partit Laburista Head of Delegation and MEP Alfred Sant noted that in some markets, like in Germany and Denmark, covered bonds are considered as vital, while in others such as Malta, they are not used at all. Covered bonds are debt securities issued by a financial institution and backed by a separate group of assets; in the event the financial institution becomes insolvent, the bond is covered.

Sant was speaking at the plenary session at the European Parliament where he said that while it was not easy to find a compromised agreement he explained that the Covered Bonds agreement reached between the European institutions avoids all risk of disruption of national covered bonds systems whilst promoting harmonization at a European level, enhancing European level transparency and investor protection.

The former Prime Minister observed that covered bonds have developed differently in each country, ‘hence why reaching a final agreement was not easy’, Sant said.

Sant asked whether the European framework to be adopted for covered bonds should be a one size fits all arrangement or whether the model to be adopted would allow for a full acceptance of arrangements that have been successfully promoted in national markets, reiterating his support for the latter model.