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Covered Bond Talks Intensify as Bank Liquidity Rules in Play (2) 

May 9, 2014
Peter Levring, Jim Brunsden, Bloomberg

European talks on how to treat covered bonds in banks’ liquidity buffers intensified this week as nations with the most at stake fought to ensure Basel III rules don’t hobble their markets.

Denmark, home to the world’s biggest covered-bond market per capita, is moving closer to winning some concessions from the European Union that would help avert a sell-off of the nation’s mortgage-backed securities, Karsten Beltoft, head of the Mortgage Bankers’ Federation in Copenhagen, said yesterday.

Covered bond issuers are now waiting for the European Commission to decide whether it will follow a recommendation by the European Banking Authority to cap use of the securities in banks’ liquidity buffers at 40 percent. According to Beltoft, there are already indications the cap may be raised to about 60 percent. Danish banks currently use covered bonds to meet about 70 percent of their liquidity needs. The commission is due to announce its decision by next month.

Read more: Bloomberg

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