Banks avoiding covered bonds for LCR buffer over liquidity fears

Concerns raised about liquidity in stressed environments

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Are covered bonds a liquid asset? Some fear not under stressed conditions

European banks are limiting covered bonds usage in their liquidity buffers due to concerns over saleability in stressed environments.

Covered bonds were included as a Level 2A asset in the Basel Committee on Banking Supervision's revised version of the liquidity coverage ratio (LCR) in January 2013, which means they can comprise up to 40% of a bank's total stock of liquid assets after haircuts are applied.

But speaking at the Liquidity and Funding Risk conference in London on October 1,

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