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Covered bonds


This paper presents a landscape of European Covered Bonds which grew rapidly since the 2008 financial crisis.
Covered Bonds are debt instruments backed by a pool of loans or assets which make it more secured than a standard bond.
As of December 2010, the European Covered Bond market represented EUR 1,583 billion and was lead by three domestic specificities: the Spanish Cédulas account for 33%, the German Pfandbriefe for 28% and the three French CB types (CRH, OF and structured CB) for 24%. 
This document shows the various legal frameworks existing between the major European Covered Bonds types, the different assets that can be securitized and the role of banks in such a transaction.
Despite some disparities, the “Covered Bond Purchase Program” launched by the Eurosystem in May 2009 reintroduced some liquidity in this market. 
This note also describes a 2010 American law pushing forward more security in the Covered Bonds market by adopting some rules similar to the European market. After the credit crunch of the housing market in the US, making a law to decrease credit risk and counterparty risk has become a top priority.

Finally, the last appendix offers a comparative analysis between ABS and Covered Bonds that, at first sight, seem close in terms of structure.

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last update 02 June 2020