Equivalence Regime for Third-Country Covered Bonds – EBA recommends an equivalence regime in principle, though real-world implementation may prove challenging

The European Banking Authority ("EBA") published, in response to the European Commission's ("EC") call for advice of July 2023, its advice on the EU Covered Bond Framework (the "EBA Advice") on 23 September 2025. The EBA Advice is detailed in nature, covering recommendations to improve the EU Covered Bond Framework and focusing on the main components of Directive (EU) 2019/2162 (the "Covered Bond Directive") (including, amongst other items, the scope of eligible assets and composition of cover pools (including derivative contracts), the role of the cover pool monitor, coverage and overcollateralization requirements, liquidity requirements and the requirements for soft-bullet covered bonds with extendable maturities). As requested by the EC, the EBA Advice also covers the advantages and disadvantages of the introduction of an equivalence regime for "third-country covered bonds", the conditions which would need to be in place for an equivalence assessment for such covered bonds and suggestions as to the design and process of an equivalence assessment.

In this Legal Update, we provide an overview of the EBA Advice on the introduction of an equivalence regime for "third-country covered bonds" and outline the key challenges that may lie ahead in the effective implementation of such an equivalence regime by the EC.