Covered Bonds Get Second-Class Status in EU Liquidity Review
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The European Union’s top banking regulator said that covered bonds shouldn’t be considered a top-tier asset for banks’ emergency liquidity buffers, dealing a blow to Denmark’s $530 billion mortgage-bond market.
Covered bonds, which are debt securities backed by cash flows from other assets such as mortgages, aren’t as stable as European Union sovereign debt for the purpose of building up banks’ liquidity buffers, the London-based European Banking Authority said today. Corporate bonds, equities and some local government debt were also considered to be less liquid than state bonds.