The Updated Law on Spanish Covered Bonds: Well Aligned with the European Directive
On 3 November 2021, the Spanish Government published the Royal Decree-law (the Law) that transposes the European Commission’s Covered Bond Directive (the Directive), which outlines the harmonisation of covered bond (CB) frameworks across Europe, into Spanish law. The Law aligns with the Directive and includes several positive features for Spanish CBs. However, the high Spanish overcollateralisation level, which is one of the main strengths of CB, may decrease in the future because the required OC level has dropped to 5% from the previously required 25% and 42.9%.This commentary is based on DBRS Morningstar's first understanding of the updated rules, and summarises the most relevant changes.
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