JPMorgan: Global Covered Bonds — A Primer
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
Key Views
- No covered bond default in over 200 years; even in the GFC and European debt crisis, assets and liabilities were transferred or acquired (Northern Rock, Bradford & Bingley, Banco Espírito Santo/Novo Banco, Banco Popular Español/Santander).
- Issuance follows on-balance-sheet, specialised-bank or SPV models, differing in asset segregation and dual-recourse strength.
- Agencies start from issuer ratings, adding notches for dual recourse, bail-in exclusion, jurisdictional support and cover-pool stress tests.
- CRR grants preferential risk weights to compliant EEA bonds; Regulation (EU) 2022/786 resolved the LCR double-counting of the CBD Article 16 liquidity buffer.
- CBPP3 peaked just above €300bn and is running off naturally since APP reinvestments stopped on 1 July 2023; the ECB holds roughly a quarter (~€800bn, August 2026) of eligible outstanding covered bonds, with ~€500bn still ECB collateral in 26Q2 versus TLTRO III peak usage above €700bn.
Outlook
The EU third-country equivalence regime is unfinished (EBA advice submitted end-25Q3); the first ESN, issued by Bpifrance in 2026, lacks unified dedicated regulation. No specific recommendations are given.