Question ID:
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Credit risk
4, 5
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
Not applicable
Disclose name of institution / entity:
Type of submitter:
Credit institution
Subject Matter:
Exposures in the form of covered bonds

Would the preferential treatment set out in Articles 129(4) and (5) and in Article 161(1)(d) be applicable to derivative instruments entered into in relation to covered bonds exposures, provided that the counterparty’s claims are secured by the same pool of assets as the covered bonds’ and rank pari passu with the claims of the covered bonds holders?

Background on the question:

It is common that with the objective to best ensure payments of principal and interest to covered bondholders, the issuer of covered bonds hedges certain risks with a swap counterparty protection providers through interest rates or cross currency swaps. In these cases, usually, the swap counterparty’s claims are secured by the same pool of assets and rank pari passu with the claims of the covered bonds holders.

Date of submission:
Published as Final Q&A:
Final Answer:

Article 129(1) Regulation (EU) No 575/2013 (CRR) permits the preferential treatment set out in paragraphs (4) and (5) exclusively for bonds as referred to in Article 52(4) of Directive 2009/65/EC (covered bonds). Consequently, this is not applicable to derivative instruments.




This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Financial Stability, Financial services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.

Final Q&A
Answer prepared by:
Answer prepared by the European Commission because it is a matter of interpretation of Union law.
Note to Q&A:

Update 26.03.2021: This Q&A has not yet been reviewed by the European Commission in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR).