Covered Bonds reached between European Union (EU) institutions avoids all risk of disruption of well-functioning national covered bonds systems whilst promoting harmonization at European level and enhancing transparency and investor protect, Labour MEP Alfred Sant said on Friday.

Covered bonds are debt securities issued by a credit institution and collateralized against a pool of assets that, in case of failure of the issuer, can cover claims at any point of time. The investor has dual recourse against the issuer and the collateral.

The text of the Covered Bond Directive was later adopted by the European Parliament (EP), and Sant said that he was glad that "these priorities are reflected in the text and strongly advise this House to support the proposal that is before us".

He noted that in some markets, like Denmark and Germany, covered bonds are rightly considered as vital investment tools. In others, like his country, Malta, they are not used at all.

Reaching a final agreement was not easy as in each country covered bonds have developed differently, he stressed.

"Should the European framework for covered bonds be a one size fits all arrangement, as it is frequently the temptation to do, when things are being settled in Strasbourg and Brussels? Or should the model we adopt allow for a full acceptance of arrangements that have been successfully promoted in national markets? Throughout, I was fully supportive of the latter model."

Sant then added that there was no need to change the approaches that national markets had endorsed for a long time, but pushed for a European framework to be established which aims towards progressive convergence towards similar rules and practices.

According to MEP Sant, the compromise text reached by the EU Institutions fully responds to this challenge, it includes many elements of the ECON report of 2018 and corrects aspects that would have been a concern for the S&D Group.