The Swedish Bankers’ Association has called for liquidity assistance by central banks to be included in reporting of encumbered and unencumbered assets in a response to a European Banking Authority (EBA) consultation that finished last Thursday (20 March).

Danish mortgage banks have begun announcing their plans for the forthcoming auction season of more than Dkr200bn (Eu26.8bn) of ARMs bond sales, while Danish MPs launched the latest salvo in the ongoing battle for covered bonds to be included as Level 1 assets in LCRs.

The European Commission will take into account “features specific to the EU banking system and financial markets” in addition to European Banking Authority (EBA) reports and international standards when deciding on covered bonds’ status in the LCRs, according to an EC spokesperson.

The European Banking Authority (EBA) has excluded covered bonds from assets it has recommended should be eligible as extremely high quality liquid assets for Liquidity Coverage Ratio (LCR) purposes in a report to the European Commission.

The EBA on 20 December published its final recommendations on the Liquidity Coverage Ratio (LCR), which exclude covered bonds from Level 1 status. Crédit Agricole CIB’s Florian Eichert takes a closer look at the potential implications, and sees investor behaviour only really changing in response to a lower minimum rating criterion. 

Fears are mounting that covered bonds could fail to secure a position as Level 1 LCR assets after it emerged that the EBA’s Board of Supervisors is against such a recommendation. However, the ECBC and others have said that Level 1 inclusion remains a real possibility.

The European Banking Authority on Monday released technical standards that ensure banks can no longer imprudently generate capital by writing down liabilities due to changes in their own credit risk, but the regulator did so in a way that safeguards legitimate Danish practices.