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Bond issue
The issuance spread was fixed at mid swap plus 7 basis points. This implies a reoffer yield for investors of 1.278 per cent. The coupon rate is 1.25 per cent. HSBC, Morgan Stanley and RBS acted as lead managers. The issue has drawn strong demand, with close to €12 billion in orders received from investors worldwide.
Christophe Frankel, CFO and Deputy CEO, said: “The beginning of the new year has been positive for the EFSF. Today’s transaction is an excellent start to achieving the EFSF’s funding target of €34.5 billion for 2014. In addition, I am pleased to note the publication of the EBA’s recommendation that EFSF and ESM bills and bonds are considered as extremely high quality liquid assets”.
EBA-report
The Capital Requirement Regulation (EU), published by the European Union in June 2013, has tasked the European Banking Authority (EBA) to advise on appropriate uniform definitions of liquid assets for the LCR buffer. Two categories of transferable assets are defined: assets of “extremely high” and “high” liquid and credit quality
The EBA has now published a report which provides recommendations on the scope of these two categories, mentioning specifically the EFSF and ESM Notes as assets to be considered as transferrable assets of extremely high liquidity and credit quality:
“Particularly the EBA recommends to consider all sort of bonds issued or guaranteed by EEA Sovereigns and EEA Central Banks in the domestic currency and also those issued or guaranteed by Supranational Institutions (the Bank of International Settlements, the International Monetary Fund, the Commission, multilateral development banks, the European Financial Stability Facility and the European Stability Mechanism) as transferable assets of extremely high liquidity and credit quality”.
For the time being, this is a recommendation of the EBA based on their analysis, and following the mandate from the CRR. It can be expected now that the Commission will adopt a delegated act to specify in detail the liquidity coverage requirements, which will be based on these recommendations and analysis, among others. As per Article 460, the European Commission shall adopt the delegated act referred to by 30 June, 2014