The Implementation of the EU Covered Bond Directive in Finland

The volume of covered bonds – that is debt obligations issued by a credit institution which are secured against a ring-fenced asset pool – has grown significantly in Europe over the past 15 years with over €2.57trn outstanding at the end of 2018.1 Covered bonds provide dual-recourse protection to bondholders by granting them direct recourse to the cover assets as a preferred creditor and recourse to the issuer’s other assets as an ordinary creditor thus making them a “stable and cost-effective source of funding for European banks”.2 However the approach to regulating covered bonds has previously been piecemeal across the different Member States of the European Union (EU). The EU in an attempt to address this and create an integrated single market for covered bonds passed Directive (EU) 2019/2162 (Covered Bonds Directive) in 2019...