Legal provisions of COM(2018)94 - Issue of covered bonds and covered bond public supervision

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dossier COM(2018)94 - Issue of covered bonds and covered bond public supervision.
document COM(2018)94 EN
date November 27, 2019


TITLE I SUBJECT MATTER, SCOPE AND DEFINITIONS

Article 1 Subject matter

This Directive lays down the following investor protection rules concerning:

(1) requirements for issuing covered bonds;

(2) the structural features of covered bonds;

(3) covered bond public supervision;

(4) publication requirements for competent authorities in relation to covered bonds.

Article 2 Scope

This Directive applies to covered bonds issued by credit institutions established in the Union.

Article 3 Definitions

For the purposes of this Directive, the following definitions shall apply:

13 14

OJ C 369, 17.12.2011, p. 14.

Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (OJ L 8, 12.1.2001, p.1).

5

(1) covered bond means a debt obligation issued by a credit institution and secured by a cover pool of assets which covered bond investors have direct recourse to as preferred creditors;

(2) covered bond programme means the assets and liabilities as referred to in Article 15 as well as activities of the credit institution related to the issuing of covered bonds under one permission granted in accordance with Article 19;

(3) cover pool means the assets that constitute the collateral for the covered bonds and that are segregated from other assets held by the credit institution issuing covered bonds;

(4) credit institution means credit institution as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013;

(5) specialised mortgage credit institution means a credit institution which funds loans solely through the issue of covered bonds, which is permitted by law to carry out mortgage and public sector lending only and which is not permitted to take deposits but can take other repayable funds from the public;

(6) acceleration of a covered bond means a situation in which a covered bond is declared by the credit institution which issued the covered bond or the credit institution's representative to be immediately due and payable and in respect of which the payments to the covered bond investors are to be repaid earlier than the original maturity date;

(7) market value means, for the purposes of immovable property, market value as defined in point (76) of Article 4(1) of Regulation (EU) No 575/2013;

(8) mortgage lending value means, for the purposes of immovable property, the mortgage lending value as defined in point (74) of Article 4(1) of Regulation (EU) No 575/2013;

(9) residential property means residential property as defined in point (75) of Article 4(1) of Regulation (EU) No 575/2013;

(10) primary asset means a dominant asset in the cover pool determining the nature of the cover pool;

(11) substitution asset means an asset contributing to the coverage requirements, other than the primary assets;

(12) overcollateralisation means the statutory or contractual level of collateral exceeding the coverage requirement as set out in Article 15;

(13) match funding requirement means rules requiring that the cash flows between liabilities and assets falling due be matched by ensuring that payments from borrowers be received prior to making payments to covered bond investors and that the amounts received from the borrowers are at least equivalent in value to the payments to be made to the covered bond investors;

(14) net liquidity outflow means all liabilities, including principal and interest payments and payments under derivative contracts of the covered bond programme after having deducted the inflows derived from the assets in the cover pool;

(15) extendable maturity structure means a mechanism providing for the possibility to extend the scheduled maturity of covered bonds for a certain period of time and in the event that a specific trigger occurs;

(16) covered bond public supervision means the supervision of covered bonds programmes ensuring compliance with and enforcement of the requirements applicable to the issue of covered bonds;

(17) special administrator means the person or entity appointed to administrate a covered bond programme in the event of insolvency of the credit institution issuing covered bonds under that programme.

TITLE II STRUCTURAL FEATURES OF COVERED BONDS

Chapter 1 Dual recourse and bankruptcy remoteness

Article 4 Dual recourse

1. Member States shall lay down rules entitling the covered bonds investors to the following claims:

(a)     a claim on the credit institution issuing covered bonds;

(b)     in case of insolvency or resolution of the credit institution issuing covered bonds, a priority claim on the principal and any accrued interest from assets included in the cover pool;

(c)     in case of insolvency of the credit institution issuing covered bonds and in the event that the priority claim as referred to in point (b) cannot be fully satisfied, a claim on the insolvency estate of that credit institution, which ranks pari passu with the claims of the credit institution's ordinary unsecured creditors determined in accordance with the national laws governing the ranking in normal insolvency procedures.

2. The claims referred to in paragraph 1 shall be limited to the full payment obligations attached to the covered bonds.

3. For the purposes of point (c) of paragraph 1, in the case of insolvency of a specialised mortgage credit institution, Member States may lay down rules granting the covered bond investors a claim that ranks senior to the claim of that specialised mortgage credit institution's ordinary unsecured creditors determined in accordance with the national laws governing the ranking of creditors in normal insolvency procedures, but junior to any other preferred creditors.

Article 5 Bankruptcy remoteness of the covered bonds

Member States shall ensure that the payment obligations attached to the covered bonds are not subject to automatic acceleration upon the insolvency or resolution of the credit institution issuing covered bonds.

Chapter 2 Cover pool and coverage

Section I Eligible assets

Article 6 Eligible assets

1. Member States shall ensure investor protection by requiring that covered bonds are at all times collateralised by high quality assets referred to in points (a) to (g) of Article 129(1) of Regulation (EU) No 575/2013 or by other high quality assets that meet at least the following requirements:

(a)     either the market value or mortgage lending value of the assets can be determined;

(b)     a mortgage, charge, lien or other guarantee on the asset is enforceable;

(c)     all legal requirements for establishing the mortgage, charge, lien or guarantee on the asset have been fulfilled;

(d)     the mortgage, charge, lien or guarantee securing the asset enable the credit institution issuing covered bonds to realise the value of the asset without undue delay.

For the purposes of point (a), Member States shall lay down rules on valuation of assets.

For the purposes of point (b), Member States shall lay down rules ensuring the prompt filing and registration of mortgages, charges, liens or guarantee on assets in the cover pool.

For the purposes of points (b) and (d), Member States shall ensure that credit institutions issuing covered bonds assess the enforceability of assets before including such assets in the cover pool.

2. Member States shall ensure investor protection by requiring that credit institutions issuing covered bonds have in place procedures to monitor that the assets used as collateral are adequately insured against the risk of damage.

3. For the purposes of paragraphs 1 and 2, Member States shall require credit institutions issuing covered bonds to document the assets used as collateral and their lending policies regarding their compliance with those paragraphs.

Article 7 Assets located outside of the Union

1. Subject to the provision in paragraph 2, Member States may allow credit institutions issuing covered bonds to include assets located outside of the Union in the cover pool.

2. Where Member States allow for the inclusion referred to in paragraph 1, they shall ensure investor protection by verifying whether the assets located outside of the Union meet all the requirements set out in Article 6 and that the realisation of such assets is legally enforceable in a way similar to assets located within the Union.

Article 8 Intragroup pooled covered bond structures

Member States may lay down rules regarding the use, by way of an intragroup transaction, of covered bonds issued by a credit institution belonging to a group ('internally issued covered bonds') as collateral for the external issue of covered bonds by another credit institution belonging to the same group (externally issued covered bonds'). Member States shall ensure investor protection by including at least the following requirements in those rules:

(a)     the internally issued covered bonds, which are used as collateral for the externally issued covered bonds, are recorded on the balance sheet of the credit institution which issues the externally issued covered bonds;

(b)     the credit institution issuing the externally issued covered bond has a claim on the credit institution issuing the internally issued covered bonds, which is secured by the internally issued covered bonds;

(c)     the externally issued covered bonds are sold to covered bond investors outside the group;

(d)     both the internally and the externally issued covered bonds qualify for credit quality step 1 as referred to in Part Three, Title II, Chapter 2 of Regulation (EU) No 575/2013 and are collateralised by residential or commercial property mortgages.

Article 9 Joint funding

1. Subject to the provisions in paragraph 2, Member States shall allow the use of loans collateralised by residential or commercial property mortgages, charges, liens or other comparable security rights granted by a credit institution as assets in the cover pool for the issue of covered bonds by another credit institution.

2. Member States shall ensure investor protection by laying down rules regulating the transfer of loans and mortgages, charges, liens or other comparable security rights from the credit institution which issued them to the credit institution issuing covered bonds. Those rules shall ensure that all requirements laid down in Articles 6 and 12 are met.

Article 10 Composition of the cover pool

Member States shall ensure investor protection by providing for a sufficient level of homogeneity of the assets in the cover pool so that they shall be of a similar nature in terms of structural features, lifetime of assets or risk profile.

Article 11 Derivative contracts in the cover pool

1. Member States shall ensure investor protection by allowing derivative contracts to be

included in the cover pool only where at least the following requirements are met:

(a) the derivative contracts are included in the cover pool exclusively for risk hedging purposes;

(b) the derivative contracts are sufficiently documented;

(c)     the derivative contracts are segregated in accordance with Article 12;

(d)     the derivative contracts cannot be terminated upon the insolvency or resolution of the credit institution issuing covered bonds;

(e)     the derivative contracts comply with the rules laid down in accordance with paragraph 2.

2. For the purposes of ensuring compliance with the requirements listed in paragraph 1,

Member States shall lay down rules for cover pool derivative contracts including at least:

(a)     the eligibility criteria for the hedging counterparties;

(b)     the limits on the amount of derivative contracts in the cover pool;

(c)     the necessary documentation to be provided in relation to derivative contracts.

Article 12 Segregation of assets in the cover pool

1. Member States shall ensure investor protection by requiring that the segregation of assets in the cover pool complies with at least the following requirements:

(a)     all assets in the cover pool are identifiable by the credit institution issuing covered bonds;

(b)     all assets in the cover pool are subject to legally binding and enforceable separation by the credit institution issuing covered bonds;

(c)     all assets in the cover pool are protected from any third party claims and do not form part of the insolvency estate of the credit institution issuing covered bonds.

For the purposes of the first subparagraph, the assets in the cover pool shall include any collateral received in connection with derivative contract positions.

2. The segregation of assets in the cover pool referred to in paragraph 1 shall also apply in the case of insolvency or resolution of the credit institution issuing covered bonds.

Article 13 Cover pool monitor

1. Member States may require that credit institutions issuing covered bonds appoint a cover pool monitor to perform ongoing monitoring of the cover pool with regard to the requirements set out in Articles 6 to 12 and Articles 14 to 17.

2. Where Member States use the option provided for in paragraph 1, they shall lay down rules at least on the following aspects:

(a)     the appointment and dismissal of the cover pool monitor;

(b)     any eligibility criteria for the cover pool monitor;

(c)     the role and duties of the cover pool monitor, including in the case of insolvency or resolution of the credit institution issuing covered bonds;

(d)     the obligation to report to the competent authority designated pursuant to Article 18(2);

(e) the right of access to necessary information for the performance of the cover pool monitor's duties.

3. A cover pool monitor shall be separate and independent from the credit institution issuing covered bonds and from that credit institution's auditor.

4. Where Member States use the option provided for in paragraph 1, they shall notify EBA.

Article 14 Investor information

1. Member States shall ensure that the credit institution issuing covered bonds provides information on covered bond programmes that is sufficiently detailed to allow investors to assess the profile and risks of that programme and to carry out their due diligence.

2. For the purposes of paragraph 1, Member States shall ensure that the information is provided to investors at least on a quarterly basis and includes the following minimum portfolio information:

(a)     the value of the cover pool and outstanding covered bonds;

(b)     the geographical distribution and type of assets in the cover pool, their loan size and valuation method;

(c)     details as to risks in relation to interest rates, currency, credit, market and liquidity;

(d)     the maturity structure of assets in the cover pool and covered bonds;

(e)     the levels of required coverage, contractual and voluntary overcollateralisation;

(f)      the percentage of loans that are more than ninety days past due.

Member States shall ensure that the information is provided to investors on an aggregated basis. Member States may also require the information to be provided on a loan-by-loan basis.

3. Member States shall ensure investor protection by requiring credit institutions issuing covered bonds to publish on their website the information made available to investors in accordance with paragraphs 1 and 2.

Section II Coverage and liquidity requirements

Article 15 Requirements for coverage

1. Member State shall ensure investor protection by requiring covered bond

programmes to comply at all times with at least the following coverage requirements:

(a)     all liabilities of the covered bonds, including the obligations for the payment of principal and any accrued interest of outstanding covered bonds and costs related to maintenance and administration of a covered bond programme, are covered by the assets in the cover pool;

(b)     the calculation of the level of coverage required ensures that the total nominal amount of all assets in the cover pool are at least of the same value as the total nominal amount of outstanding covered bonds ('nominal principle');

(c) the following assets in the cover pool contribute to the coverage requirement: (i)     primary assets;

(ii) substitution assets;

(iii) liquid assets held in accordance with Article 16; (iv) derivative contracts held in accordance with Article 11; (v) statutory overcollateralisation;

(d)

uncollateralised claims where a default is considered to have occurred in accordance with Article 178 of Regulation (EU) No 575/2013 do not contribute to the cover pool.

For the purposes of point (b) of the first subparagraph, Member States may allow for other principles of calculation provided they do not result in a lower level of coverage than that calculated under the nominal principle.

2. Member States shall ensure that the calculation of coverage and the calculation of

liabilities is based on the same methodology.

Article 16 Requirement for a cover pool liquidity buffer

1. Member States shall ensure investor protection by requiring that the cover pool includes at all times a liquidity buffer composed of liquid assets available to cover the net liquidity outflow of the covered bond programme.

2. The cover pool liquidity buffer shall cover the net liquidity outflow for 180 calendar days.

3. Member States shall ensure that the cover pool liquidity buffer referred to in paragraph 1 consists of the following types of assets:

(a)     assets qualifying as level 1, level 2A and level 2B assets pursuant to Articles 10, 11 and 12 of Delegated Regulation (EU) 2015/61, valuated in accordance with Article 9 of that Delegated Regulation and segregated in accordance with Article 13 of this Directive;

(b)     exposures to credit institutions that qualify for the credit quality step 1, in accordance with Article 129(1)(c) of Regulation (EU) No 575/2013.

For the purposes of point (b) of the first subparagraph, Member States shall ensure that uncollateralised claims from defaulted exposures in accordance with Article 178 of Regulation (EU) No 575/2013 cannot contribute to the cover pool liquidity buffer.

4. Where the credit institution issuing covered bonds is subject to liquidity requirements set out in other acts of Union law, Member States may decide that the national rules transposing paragraphs 1, 2 and 3 do not apply throughout the period foreseen in those acts of Union law.

5. Member States may allow for the calculation of the principal for extendable maturity structures to be based on the final maturity date of the covered bond.

6. Member States shall ensure that the requirements set out in in paragraph 1 do not apply to covered bonds that are subject to match funding requirements.

Article 17 Conditions for extendable maturity structures

1. Member States may allow for the issue of covered bonds with extendable maturity

structures where investor protection is ensured by at least the following:

(a) the maturity extension triggers are specified in contract or statute;

(b) (c)

the maturity extension is not triggered at the discretion of the credit institution issuing covered bonds;

the information provided to the investor about the maturity structure is sufficient to enable them to determine the risk of the covered bond, and includes a detailed description of:

(i)     the maturity extensions trigger;

(ii) the consequences for the maturity extensions in the case of insolvency or resolution of the credit institution issuing covered bonds;

(iii) the role of the competent authority designated pursuant to Article 18(2) and of the special administrator with regard to the maturity extension, where relevant;

(d)     the final maturity date of the covered bond can at all times be determined;

(e)     the maturity extension does not affect the ranking of covered bond investors;

(f)      the maturity extension does not change the structural features of the covered bonds regarding dual recourse as referred to in Article 4 and bankruptcy remoteness as referred to in Article 5.

2. Member States which allow the issue of covered bonds with extendable maturity

structures shall notify EBA of their decision.

TITLE III COVERED BOND PUBLIC SUPERVISION

Article 18 Covered bond public supervision

1. Member States shall ensure investor protection by providing that the issue of covered bonds is subject to a covered bond public supervision.

2. For the purposes of the covered bond public supervision referred to in paragraph 1, Member States shall designate one or more competent authorities. They shall inform the Commission and EBA of those designated authorities and shall indicate any division of functions and duties.

3. Member States shall ensure that the competent authorities designated pursuant to paragraph 2 monitor the issue of covered bonds so as to assess compliance with the requirements laid down in the national provisions transposing this Directive.

4. Member States shall ensure that credit institutions issuing covered bonds register all their transactions in relation to the covered bond programme and have in place adequate and appropriate documentation systems and processes.

5. Member States shall further ensure that appropriate measures are in place to enable the competent authorities designated pursuant to paragraph 2 to obtain the

information needed in order to assess the compliance with the requirements laid down in the national provisions transposing this Directive, investigate possible breaches of those requirements, and impose administrative penalties and remedial measures in accordance with the national provisions transposing Article 23.

6. Member States shall ensure that the competent authorities designated pursuant to

paragraph 2, have the expertise, resources, operational capacity, powers and independence necessary to carry out the functions relating to covered bond public supervision.

Article 19 Permission for covered bond programmes

1. Member States shall ensure investor protection by requiring permission for a covered bond programme to be obtained before issuing covered bonds under that programme. Member States shall confer the power to grant such permissions upon the competent authorities designated pursuant to Article 18(2).

2. Member States shall lay down the requirements for the permission referred to in paragraph 1, including at least the following:

(a)     an adequate programme of operations setting out the issue of covered bonds;

(b)     adequate policies, processes and methodologies aimed at investor protection for the approval, amendment, renewal and refinance of loans included in the cover pool;

(c)     management and staff dedicated to the covered bond programme which have adequate qualifications and knowledge regarding the issue of covered bonds and the administration of the covered bond programme;

(d)     an administrative set-up of the cover pool that meets the applicable requirements laid down in the national provisions transposing this Directive.

Article 20 Covered bond public supervision in insolvency or resolution

1. Competent authorities designated pursuant to Article 18(2) shall cooperate with the resolution authority in the event of the resolution of a credit institution issuing covered bonds in order to ensure that the rights and interests of the covered bond investors are preserved, including at least by verifying the continuous management of the covered bond programme during the period of the resolution process.

2. Member States may provide for a special administrator to be appointed in the case of the insolvency of a credit institution issuing covered bonds to ensure that the rights and interests of the covered bond investors are preserved, including at least by verifying the continuous management of the covered bond programme during the period of the insolvency process.

Where Member States use that option, they shall require that the competent authorities designated pursuant to Article 18(2) be consulted regarding the appointment and dismissal of the special administrator.

3. Where Member States provide for the appointment of a special administrator in accordance with paragraph 2, they shall adopt rules laying down the tasks and responsibilities of that special administrator at least in relation to:

4.

(a)     discharging the liabilities attached to the covered bonds;

(b)     managing and realising assets in the cover pool, including their transfer together with covered bond liabilities to another credit institution issuing covered bonds;

(c)     carrying out legal transactions necessary for the proper administration of the cover pool, for the on-going monitoring of the coverage of the liabilities attached to the covered bonds, to initiate proceedings in order to recover assets in the cover pool and to transfer those remaining assets after all covered bond liabilities are met to the insolvency estate of the credit institution which issued the covered bonds.

Member States shall ensure the coordination and exchange of information for the purposes of the insolvency or resolution process between the competent authorities designated pursuant to Article 18(2), the special administrator where such an administrator has been appointed and the resolution authority.

1.

2.

3.

Article 21 Reporting to the competent authorities

Member States shall ensure investor protection by requiring credit institutions issuing covered bonds to report the information set out in paragraph 2 on covered bond programmes to competent authorities designated pursuant to Article 18(2). The reporting shall be on a regular basis and upon request. Member States shall lay down rules on the frequency of the reporting on a regular basis.

The reporting obligations to be laid down pursuant to paragraph 1 shall require the information to be provided at least on the following requirements of the covered bond programme:

(a)     dual recourse in accordance with Article 4;

(b)     bankruptcy remoteness of the covered bond in accordance with Article 5;

(c)     the eligibility of assets and cover pool requirements in accordance with Articles 6 to 11;

(d)     the segregation of assets in the cover pool in accordance with Article 12;

(e)     the functioning of the cover pool monitor in accordance with Article 13;

(f)      the investor information requirements in accordance with Article 14;

(g)     the coverage requirements in accordance with Article 15; (h) the cover pool liquidity buffer in accordance with Article 16;

(i)     the conditions for extendable maturity structures in accordance with Article 17.

Member States shall provide for rules on the reporting on the requirements set out in paragraph 2 by the credit institutions issuing covered bonds to the competent authority designated pursuant to Article 18(2) in the event of insolvency or resolution of a credit institution issuing covered bonds.

Article 22 Powers of competent authorities for the purposes of covered bonds public supervision

1. Member States shall ensure investor protection by giving competent authorities designated pursuant to Article 18(2) all supervisory, investigatory and sanctioning powers that are necessary to perform the task of covered bond public supervision.

2. The powers referred to in the paragraph 1 shall include the following:

(a)     the power to grant or refuse permissions pursuant to Article 19;

(b)     the power to regularly review the covered bond programme in order to assess compliance with this Directive;

(c)     the power to carry out on-site and off-site inspections;

(d)     the power to impose administrative sanctions or penalties and remedial measures in accordance with the national provisions transposing Article 23;

(e)     the power to adopt and implement supervisory guidelines relating to the issue of covered bonds.

1.

Article 23 Administrative penalties and remedial measures

Member States shall lay down rules establishing appropriate administrative penalties and remedial measures applicable at least in the following situations:

(a)     a credit institution has acquired a permission to issue covered bonds through false statements or other irregular means;

(b)     a credit institution no longer fulfils the conditions under which a permission was given;

(c)     a credit institution issues covered bonds without obtaining the permission in accordance with the provisions transposing Article 19;

(d)     a credit institution issuing covered bonds fails to meet the requirements set out in the provisions transposing Article 4;

(e)     a credit institution issuing covered bonds issues covered bonds not complying with the requirements set out in the provisions transposing Article 5;

(f)      a credit institution issuing covered bonds issues covered bonds not collateralised in accordance with the provisions transposing Article 6;

(g)     a credit institution issuing covered bonds issues covered bonds collateralised by assets located outside the Union in breach of the requirements laid down in the provisions transposing Article 7;

(h) a credit institution issuing covered bonds collateralises covered bonds in an intragroup pooled covered bonds structure in breach of the requirements laid down in the provisions transposing Article 8;

(i)     a credit institution issuing covered bonds fails to fulfil the conditions for joint

funding laid down in the provisions transposing Article 9;

(j)     a credit institution issuing covered bonds fails to meet the requirements of

composition of the cover pool laid down in the provisions transposing Article

10;

2.

3. 4.

(k)

(l)

(m)

(n)

(o)

(p)

a credit institution issuing covered bonds includes derivative contracts in the cover pool other than for hedging purposes or fails to meet the requirements laid down in the provisions transposing Article 11;

the credit institution issuing covered bonds fails to comply with the requirements of segregation of assets in the cover pool in accordance with the provisions transposing Article 12;

a credit institution issuing covered bonds fails to report information or provides incomplete or inaccurate information in breach of the provisions transposing Article 14;

a credit institution issuing covered bonds repeatedly or persistently fails to maintain a cover pool liquidity buffer in breach of the provisions transposing

Article 16;

a credit institution issuing covered bonds fails to fulfil the conditions for extendable maturity structures laid down in the provisions transposing Article 17;

a credit institution issuing covered bonds fails to report information or provides incomplete or inaccurate information on the obligations in breach of the provisions transposing points (a) to (i) of Article 21(2).

The penalties and measures referred to in paragraph 1 shall be effective, proportionate and dissuasive and shall include at least the following:

(a) (b)

(c)

(d)

a withdrawal of permission to issue covered bonds;

a public statement, which indicates the identity of the natural or legal person and the nature of the breach in accordance with Article 24;

an order requiring the natural or legal person to cease the conduct and to desist from a repetition of that conduct;

administrative pecuniary penalties.

Member States shall also ensure that administrative penalties and remedial measures are effectively implemented.

Member States shall ensure that when determining the type of administrative penalties or other remedial measures and the amount of those administrative pecuniary penalties, that competent authorities take into account all the following circumstances, where relevant:

(a)     the gravity and the duration of the breach;

(b)     the degree of responsibility of the natural or legal person responsible for the breach;

(c)     the financial strength of the natural or legal person responsible for the breach, including by reference to the total turnover of a legal person or the annual income of a natural person;

(d)     the importance of profits gained or losses avoided because of the breach by the natural or legal person responsible for the breach, insofar as they can be determined;

(e)     the losses caused to third parties by the breach, insofar as those losses can be determined;

(f)      the level of cooperation by the natural or legal person responsible for the breach with the competent authority;

(g)     previous breaches by the natural or legal person responsible for the breach; (h) any actual or potential systemic consequences of the breach.

5. Where the provisions referred to in paragraph 1 apply to legal persons, Member States shall also ensure that competent authorities designated pursuant to Article 18(2) apply the administrative penalties and remedial measures set out in paragraph 2 of this Article, to members of the management body, and to other individuals who under national law are responsible for the breach.

6. Member States shall ensure that before taking any decision imposing administrative penalties or remedial measures as set out in paragraph 2, the competent authorities designated pursuant to Article 18(2), give the natural or legal person concerned the opportunity to be heard.

7. Member States shall ensure that any decision imposing administrative sanctions or remedial measures as set out in paragraph 2 is properly reasoned and is subject to the right of appeal.

Article 24 Publication of administrative sanctions and remedial measures

1. Member States shall ensure that the provisions transposing this Directive include rules requiring that administrative sanctions and remedial measures be published without undue delay on the official website of the competent authorities designated pursuant to Article 18(2).

2. The rules adopted pursuant to paragraph 1 shall require at a minimum the publication of any decision from which no appeal lies and which is imposed for breach of the provisions transposing this Directive.

3. Member States shall ensure that such a publication includes information on the type and nature of the breach and the identity of the natural or legal person on whom the penalty is imposed. They shall further ensure that such information is published without undue delay after that person is informed of those penalties and subject to paragraph 4.

4. Where Member States permit publication of penalties against which an appeal lies, competent authorities designated pursuant to Article 18(2) shall, without undue delay, also publish on their official website information the status of the appeal and the outcome thereof.

5. Member States shall ensure that competent authorities designated pursuant to Article 18(2) publish the penalties on an anonymous basis and in a manner in accordance with national law, in any of the following circumstances:

(a)     where the penalty is imposed on a natural person and the publication of personal data is found to be disproportionate;

(b)     where publication would jeopardise the stability of financial markets or an ongoing criminal investigation;

(c)     where publication would cause, insofar as it can be determined, disproportionate damage to the institutions or the natural persons involved.

6. In the case of a decision to publish a sanction or measure on an anonymous basis, Member States may allow for the publication of the relevant data to be postponed.

7. Member States shall ensure that any final court ruling annulling a decision imposing an administrative sanction or a remedial measure be also published.

8. Member States shall ensure that any publication referred to in paragraphs 2 to 6 remains on the official website of the competent authority designated pursuant to Article 18(2) for at least five years after its publication. Personal data contained in the publication shall only be kept on the official website for the period which is necessary and in accordance with the applicable personal data protection rules.

9. Competent authorities designated pursuant to Article 18(2) shall inform EBA of any administrative sanctions and remedial measures imposed, including, where appropriate, any appeal in relation thereto and the outcome thereof. Member States shall ensure that competent authorities receive information and details of the final judgement in relation to any criminal sanction imposed which they shall also submit to EBA.

10. EBA shall maintain a central database of administrative sanctions and remedial measures communicated to them. That database shall be only accessible to competent authorities and shall be updated on the basis of the information provided by the competent authorities in accordance with paragraph 9.

Article 25 Cooperation obligations

1. Member States shall ensure that competent authorities designated pursuant to Article 18(2) cooperate closely with the competent authority performing the general supervision of credit institutions in accordance with relevant Union law applicable to those institutions.

2. Member States shall further ensure that competent authorities designated pursuant to Article 18(2) cooperate closely with each other. That cooperation shall include providing one another with any information which is relevant for the exercise of the other authorities' supervisory tasks under the national provisions transposing this Directive.

3. For the purposes of the second sentence of paragraph 2, Member States shall ensure that the competent authorities designated pursuant to Article 18(2) carry out the following:

(a)     communicate all relevant information upon request from another such competent authority;

(b)     communicate on their own initiative any essential information to other competent authorities in other Member States.

4. Member States shall also ensure that the competent authorities referred to in paragraph 1 cooperate with EBA for the purposes of this Directive.

5. For the purposes of this Article, information shall be regarded as essential if it could materially influence the assessment of the issue of covered bonds in another Member State.

Article 26 Disclosure requirements

1. Member States shall ensure that the following information is published by the competent authorities designated pursuant to Article 18(2) on their official website:

(a)     the texts of their national laws, regulations, administrative rules and general guidance adopted in relation to the issue of covered bonds;

(b)     the list of credit institutions permitted to issue covered bonds;

(c)     the list of covered bonds allowed to use the European Covered Bonds label.

2. The information published in accordance with paragraph 1 shall be sufficient to enable a meaningful comparison of the approaches adopted by the competent authorities of the different Member States. This information shall be updated to take account of any changes.

3. For the purposes of points (b) and (c) of paragraph 1, competent authorities designated pursuant to Article 18(2) shall on an annual basis notify EBA of the lists of credit institutions and covered bonds.

TITLE IV LABELLING

Article 27 Labelling

Member States shall allow credit institutions to use the label European Covered Bonds in respect of covered bonds which meet the requirements laid down in the provisions transposing this Directive.

TITLE V AMENDMENTS TO OTHER DIRECTIVES

Article 28 Amendment to Directive 2009/65/EC

Article 52(4) of Directive 2009/65/EC is amended as follows:

(1) the first subparagraph is replaced by the following:

"Member States may raise the 5 % limit laid down in the first subparagraph of paragraph 1 to a maximum of 25 % where bonds were issued before [OP: please insert the date laid down in the second subparagraph of Article 32(1) of this Directive + 1 day] and met the requirements set out in this paragraph, in the version applicable on the date of their issue, or where bonds fall under the definition of covered bonds in accordance with point (1) of Article 3 of Directive (EU) 20XX/XX of the European Parliament and of the Council*.


* [OP: Please insert reference to Directive (EU) …/… of the European Parliament and

of the Council of … on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EU and Directive 2014/59/EU (OJ C […], […], p. […])].";

(2) the third subparagraph is deleted.

Article 29 Amendment to Directive 2014/59/EU

In Article 2(1) of Directive 2014/59/EU, point 96 is replaced by the following:

"(96) ‘covered bond’ means an instrument as referred to in Article 52(4) of Directive 2009/65/EC of the European Parliament and of the Council*, in the version applicable on the date of its issue, and issued before [OP: please insert the date laid down in the second subparagraph of Article 32(1) of this Directive + 1 day] or a covered bond as defined in point (1) of Article 3 of Directive (EU) 20XX/XX of the European Parliament and of the Council**;


* Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009

on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32).

**       [OP: Please insert reference to Directive (EU) …/… of the European Parliament and

of the Council of … on the issue of covered bonds and covered bond public supervision and amending Directive 2009/65/EU and Directive 2014/59/EU (OJ C […], […], p. […])].".

TITLE VI FINAL PROVISIONS

Article 30 Transitional measures

Member States shall ensure that covered bonds issued before XX [OP: please insert the date laid down in the second subparagraph of Article 32(1) of this Directive + 1 day"] and complying with the requirements laid down in Article 52(4) of Directive 2009/65/EC, in the version applicable on the date of their issue, are not subject to the requirements set out in Articles 5 to 12 and Articles 15, 16, 17 and 19 of this Directive, but may continue to be referred to as covered bonds in accordance with this Directive until their maturity.

Article 31 Reviews and reports

1. By XX [OP: please insert the date laid down in the second subparagraph of Article 32(1) of this Directive + 3 years], the Commission shall, in close cooperation with EBA, submit a report to the European Parliament and to the Council whether an equivalence regime could be introduced for third-country credit institutions issuing covered bonds and for investors in covered bonds, taking into consideration international developments in the area of covered bonds, in particular the development of legislative frameworks in third countries.

2. By XX [OP: please insert the date laid down in the second subparagraph of Article 32(1) of this Directive + 3 years], the Commission shall, in close cooperation with EBA, submit a report to the European Parliament and to the Council, on the implementation of this Directive with regard to the level of investor protection and the developments regarding the issue of covered bonds in the Union, including:

(a) developments regarding the number of permissions to issue covered bonds;

(b)     developments regarding the number of covered bonds issued in compliance with the provisions transposing this Directive and with Article 129 of Regulation (EU) No 575/2013;

(c)     developments regarding the assets collateralising the issue of covered bonds;

(d)     developments regarding the level of overcollateralisation;

(e)     cross border investments in covered bonds, including inward and outward investment from and to third countries;

(f)      developments regarding the issue of covered bonds with extendable maturity structures

3. For the purposes of paragraph 2 by XX [OP: please insert the date laid down in the

second subparagraph of Article 32(1) of this Directive + 2 years] Member States shall transmit information on points (a) to (f) to the Commission.

Article 32 Transposition

1. Member States shall adopt and publish, by [to be inserted – entry into force + 1 year] at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.

They shall apply those provisions from [to be inserted – same as first subparagraph + 1 day].

When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

2. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 33

Entry into force

This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 34 Addressees This Directive is addressed to the Member States.