The new European Systemic Risk Board (ESRB, the macro-prudential oversight body for the EU financial system and the new European Supervisory Authorities including the European Banking Authority and the European Securities and Markets Authority) has issued a set of Recommendations on funding of credit institutions, which encourage the monitoring and assessment of funding risks by supervisors and the risk management and monitoring of asset encumbrance.  Singling out covered bonds as instruments that generate encumbrance, the ESRB recommends the harmonisation of national covered bond regulatory frameworks, particularly in relation to issues such as the quality and segregation of cover pools, insolvency remoteness, asset/liability risks affecting cover pools, and disclosure, which vary as between EU Member States.  The ESRB recommends that the EBA consider whether Guidelines or recommendations endorsing best practices should be prepared, and whether there are other instruments that generate asset encumbrance that would benefit from best practice Guidelines in this area.  Supervisory authorities are to report back to the ESRB on an initial assessment of the results of the implementation of the Recommendations, by 30 June 2014. 

Useful links:

ESRB Recommendations