A Swedish government plan to introduce a legislative 2% minimum overcollateralisation level – prompted by EU derivatives clearing regulations – would be credit positive for covered bonds, according to Moody’s.

The Swedish government is proposing to introduce a 2% minimum overcollateralisation requirement in legislation so the country’s covered bonds will meet the criteria necessary for exemption from central clearing obligations for OTC derivatives under the European Market Infrastructure Regulation (EMIR).

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 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.

European Supervisory Authorities EBA, ESMA and EIOPA launched a consultation on draft Regulatory Technical Standards for EMIR on Monday, which they said provide some flexibility for covered bonds, with one source cautiously welcoming the proposals as “looking quite positive”.