New rules on covered bonds

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Today, the Government has proposed new legislation to implement the Covered Bonds Directive in Norway.

Directive (EU) 2019/2162 (the Covered Bonds Directive) is based on the same principles as the current Norwegian covered bonds framework. Major changes are therefore not needed to implement the directive. In today’s legislative proposal, the Ministry of Finance emphasizes that the new rules should enter into force in Norway in parallel with the application date in the EU, which is 8 July 2022, since the covered bonds market is largely a European one. Common rules and definitions will make it easier for Norwegian and international investors to assess the quality and risk of covered bonds. For example, the introduction of the protected labels “European Covered Bond” and “European Covered Bond (Premium)” may accentuate the high quality of Norwegian covered bonds. Norwegian covered bonds already largely meet the requirements for “European Covered Bond (Premium).”

Implementation of the Covered Bonds Directive will also strengthen the Norwegian framework in certain respects. In particular, the introduction of a cover pool liquidity buffer requirement and new rules on investor information will represent improvements compared with the current framework.

The Covered Bonds Directive is EEA relevant, but has not yet been incorporated into the EEA Agreement. The Ministry of Finance is working with authorities in the other EEA/EFTA countries and the EU with a view to the directive being incorporated into the EEA Agreement before it applies in the EU on 8 July 2022. This effort also includes Regulation (EU) 2019/2160, which amends the rules on covered bonds in Regulation (EU) 575/2013 (the Capital Requirements Regulation, CRR).