Would UCITS compliant covered bonds containing public sector securitisation exposures qualify for preferential risk weights under Article 129 of Regulation (EU) No 575/2013 (CRR)?
Article 129(1)(a) of CRR states that covered bonds can be collateralised, inter alia, by “…exposures to or guaranteed by central governments, central banks, public sector entities, regional governments and local authorities in the Union”. However, the text does not mention that securitisation positions resulting from the securitisation of exposures to the public sector can qualify as covered assets, and a look through approach is not possible in this context. Only securitisation exposures to residential and commercial mortgages are explicitly mentioned in Article 129(1)(d) (ii) and (f) (ii) of CRR, and in each case there are specific criteria that must first be fulfilled for such securitisation exposures to qualify.
UCITS-compliant covered bonds containing public sector securitisation exposures do not qualify for preferential risk weights under Article 129 of Regulation (EU) No 575/2013 (CRR), as public sector securitisation exposures are not eligible assets under Article 129 (1) of CRR.
Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.