Italian Covered Bonds: Implementation of the New EU Legislation

On 30 March 2023, the Bank of Italy published updated provisions applicable to Italian covered bonds (CBs), thus completing the enactment of the new European Union (EU) CB legislation into the Italian framework.

Key highlights:
-- The new legislation affect in particular the eligibility criteria of the cover pool and the overcollateralisation requirements applicable to CB programmes.
-- Under the updated legislative framework, CB issuers should also fulfil a liquidity buffer requirement to cover the cumulative net outflows expected under the programme for a period of 180 days.
-- The updated provisions define a new authorisation process by the Bank of Italy for new programmes, as well as grandfathering provisions related to existing programmes.

“DBRS Morningstar expects the implementation of the new EU CB legislation in the Italian framework to have a neutral impact on its ratings on Italian CB programmes, which typically commit to tighter overcollateralisation and liquidity support requirements”, said Antonio Laudani, Vice President of European RMBS and Covered Bonds at DBRS Morningstar.