A solid start to the Nordic third quarter bank reporting season from Swedbank on Tuesday was built on by Handelsbanken and SEB, but Nordea fell short of consensus expectations, while in Norway DNB beat forecasts.
Covered bonds’ anticipated favourable treatment in the Liquidity Coverage Requirement was confirmed by the European Commission on Friday, with the highest rated covered bonds eligible for up to 70% of liquidity buffers as Level 1 assets and others in Level 2A or 2B.
ESMA released final draft RTS on central clearing requirements for OTC derivatives on Wednesday of last week (1 October) that featured several concessions to the covered bond industry, but the regulator did not make all the requested changes and related changes to Norwegian and Swedish laws are now in store.
The European Central Bank (ECB) announced a new covered bond purchase programme (CBPP) to be launched alongside a first ABS purchase programme in October this (Thursday) afternoon — the latter move having been anticipated, although covered bonds had not been in focus.
Jyske Bank Group reported Dkr2.8bn (Eu376m) of pre-tax profit for the second half of 2014 on Tuesday, its largest profit ever, although the figures are the first since the merger with BRFkredit in April, which contributed nearly Dkr2.4bn in one-off income to the result.
The covered bond market shrank last year for the first time since the European Covered Bond Council began collating statistics, according to figures released by the industry body last week, although ECBC representatives said this could be interpreted positively, while some Nordic markets are rising in prominence.
The European Securities & Markets Authority (ESMA) has proposed exempting covered bond derivatives from a central clearing obligation under EMIR if certain conditions are fulfilled, and market participants said the proposal sends a positive signal.
The European Mortgage Federation and European Covered Bond Council are being merged, with ECBC chairman Carsten Tirsbæk Madsen saying that the move should help their lobbying efforts by highlighting the relationship between covered bonds and mortgage borrowers.
A leaked European Commission paper on LCRs includes new issuer rating eligibility criteria for covered bonds that, if implemented, would result in some double-A issues not being Level 1 eligible, and some single-A issues excluded entirely. Meanwhile, the final decision on rules is likely to be delayed until after the summer.
A leaked document by European Commission staff circulating this week confirms statements from two Danish ministries last Friday that certain large, highly rated covered bonds will be eligible as Level 1 assets for Liquidity Coverage Ratio purposes, albeit with an overall cap of 70% and a haircut of 7%.