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Covered bonds and covered bond public supervision



Directive (EU) 2019/2162 on the issue of covered bonds and covered bond public supervision

Regulation (EU) 2019/2160 amending Regulation (EU) No 575/2013 as regards exposures in the form of covered bonds


  • Directive (EU) 2019/2162 aims to protect investors by establishing minimum EU-wide harmonised rules, especially on definitions and standards, for covered bonds* issued by credit institutions*. These rules apply to how covered bonds are issued, structured, supervised and publicised.
  • Regulation (EU) 2019/2160 amends Regulation (EU) No 575/2013 (known as the Capital Requirements Regulation — CRR — see summary) to strengthen the conditions for granting preferential prudential treatment to covered bonds under the CRR.


Directive (EU) 2019/2162


The directive covers the following:

  • 1.

    Structural features

    • Investors have preferential rights and are entitled to double protection (known as ‘dual recourse’) through claim against both the institution issuing the bonds and the cover assets in the case of the insolvency or resolution of this institution.
    • Covered bonds are secured at all times by high quality cover assets — typically mortgages or government debt securities — or other items specified in Article 6(1) of Directive (EU) 2019/2162.
    • Collateral assets must meet certain requirements:
      • generally accepted valuation standards for physical assets, which should be monitored and adequately insured;
      • ongoing public supervision of the counterparty’s operational soundness and financial solvability where assets are in the form of exposures;
      • risk diversification rules for assets that are not eligible pursuant to Article 129(1) CRR;
      • specific rules apply to intragroup pooling and cover pool.
    • Credit institutions must provide sufficiently detailed information on their covered bond programmes in order to enable investors to assess the profile and risks of these programmes and carry out due diligence. This information should be available on the institution’s website, supplied at least quarterly and, as a minimum, should include the following:
      • the value of the cover pool and outstanding covered bonds;
      • a list of the International Securities Identification Numbers for all covered bonds issued under the relevant programme;
      • the geographical distribution and type of cover assets, their loan size and valuation method;
      • details of market, interest rate, currency, credit and liquidity risks;
      • the maturity structure of cover assets and covered bonds;
      • the levels of required and available coverage and of statutory, contractual and voluntary over-collateralisation (the level of collateral that exceeds the required coverage);
      • the percentage of loans where a default is considered to have occurred and where the loans are more than 90 days overdue.
    • Covered bond programmes represent the structural features of a covered bonds issue that are determined by statutory rules and by contractual terms and conditions;
    • Cover pools must always include a buffer of liquid assets (available or readily convertible into cash) to cover the maximum cumulative net liquidity outflow over the next 180 days;
    • Covered bonds with extendable maturity structures (a long-term debt security whose agreed end date may be extended) may be allowed by EU countries subject to certain conditions and must be notified to the European Banking Authority (EBA).
  • 2.

    Covered bond public supervision

    • EU governments appoint one or more competent authorities to monitor the issue of covered bonds in order to assess compliance with the legal requirements.
    • Covered bond programmes are subject to a permission that should be obtained before issuing covered bonds under the relevant programme. To receive this, credit institutions must have:
      • an adequate operational programme for issuing covered bonds;
      • adequate policies, processes and methodologies for approving, amending, renewing and refinancing loans included in the cover pool;
      • dedicated and suitably qualified management and staff.
    • In the event of insolvency or restructuring of a credit institution, the competent authorities cooperate with the resolution authority handling the case to ensure the rights and interests of covered bond investors are preserved. EU countries may provide for the appointment of a special administrator.
    • Credit institutions must report regularly to the competent authorities the information specified in the directive.
    • Administrative penalties and other administrative measures apply for institutions that break the rules. These penalties and measures must be effective, proportionate and dissuasive. EU countries may decide not to provide for administrative penalties or other administrative measures for breaches which are subject to criminal penalties under their national law.
    • Competent authorities publish on their websites:
      • national laws, regulations, administrative rules, including penalties and other measures, and general guidance adopted in relation to the issue of covered bonds;
      • the list of credit institutions permitted to issue covered bonds.
    • Covered bonds are entitled to use the label ‘European Covered Bond’ (only for covered bonds which meet the requirements laid down in the provisions of national law transposing the directive) or ‘European Covered Bond (Premium)’ (only for covered bonds which meet the requirements laid down in the provisions of national law transposing the directive plus the requirements of Article 129 of the CRR). The labels are voluntary, alongside national denominations.
    • The directive makes small amendments to Directives 2009/65/EC (see summary) and 2014/59/EU (see summary).
    • Transitional measures apply to covered bonds issued before 8 July 2022.
    • The European Commission in close cooperation with EBA:
      • by 8 July 2024, must submit to the European Parliament and the Council a report and, if appropriate, a legislative proposal on whether and , if so, an equivalence regime could be introduced for non-EU country credit institutions issuing covered bonds and for investors in those covered bonds;
      • by 8 July 2025, must submit to the European Parliament and the Council a report on the implementation of the directive with regard to the level of investor protection and on the developments regarding the issue of covered bonds in the EU.

Regulation (EU) 2019/2160

  • The regulation complements Directive (EU) 2019/2162 and builds upon the current supervisory treatment of covered bonds under the CRR.
  • It adds requirements for minimum over-collateralisation* and substitute assets*, thereby strengthening the quality of the covered bonds eligible for preferential capital treatment.
  • It seeks to do so by:
    • eliminating the use as eligible assets of structures that include in the cover pool residential or commercial mortgage-backed securities, as the use of those structures is decreasing and is considered to add unnecessary complexity to covered bond programmes; and
    • requiring at least 5% over-collateralisation for covered bonds to qualify for preferential capital treatment, or 2%, if the valuation of the property is based on mortgage lending value (this over-collateralisation level may be on a statutory, contractual or voluntary basis).


  • Directive (EU) 2019/2162 has to become law in the EU countries by 8 July 2021 and will apply from 8 July 2022.
  • Regulation (EU) 2019/2160 will apply from 8 July 2022.


  • Covered bonds are widely used in some EU countries (Denmark, Germany, Spain, France, Italy, Luxembourg and Sweden) as an important source of cheap and long-term funding for banks. They help finance mortgages and public sector loans and ensure a high level of certainty for investors.
  • The directive is part of the EU’s capital markets action plan. Minimum harmonised rules across the EU for covered bonds will increase security for investors and open up new opportunities.
  • For more information, see:


Covered bond: a debt obligation issued by a credit institution secured by assets (usually a pool of mortgage loans or credits to the public sector, but also other high-quality cover assets ensuring that the credit institution issuing the covered bonds has a claim for payment and are secured by collateral assets subject to strictly defined requirements) to which their investors have direct recourse.
Credit institution: an undertaking which takes deposits or other repayable funds from the public in order to grant credit.
Over-collateralisation: the practice or process of placing an asset as collateral on a loan where the value of the asset exceeds the value of the loan.
Substitute assets: assets held in addition to primary assets, typically constituting derivatives and assets held for liquidity purposes.


Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on the issue of covered bonds and covered bond public supervision and amending Directives 2009/65/EC and 2014/59/EU (OJ L 328, 18.12.2019, pp. 29-57)

Regulation (EU) 2019/2160 of the European Parliament and of the Council of 27 November 2019 amending Regulation (EU) No 575/2013 as regards exposures in the form of covered bonds (OJ L 328, 18.12.2019, pp. 1-6)


Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions — Action Plan on Building a Capital Markets Union (COM(2015) 468 final, 30.9.2015)

Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, pp. 190-348)

Successive amendments to Directive 2014/59/EU have been incorporated into the original text. This consolidated version is of documentary value only.

Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, pp. 1-337)

See consolidated version.

Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, pp. 32-96)

See consolidated version.

last update 04.08.2020