Covered Bond Models in Europe – Legal Conflict between Secured Bonds and Deposits Regarding Insolvency Remoteness and Bail-In

Since the mid-90s and especially since 2007, there has been a tremendous revival of “Covered Bonds” in Europe, partly fostered by the financial crisis, because Covered Bonds proved to be a reliable funding source during the financial crisis. Long-term Covered bonds are complementary instruments to shorter-term deposits. Covered Bonds stabilize bank funding. Covered Bonds are not the main drivers of Asset Encumbrance, but are the Asset Encumbrance related instruments, which are the most transparent, because of the transparency provisions of many national Covered Bond laws. The Covered Bond models in Europe are very different from each other. In order to analyse their main legal structures, there is a need to classify them. Furthermore, CB definitions and criteria in all EU legislation should be harmonized