December 2019 saw the enactment in European Union of a Covered Bond Framework consisting of a Covered Bond Directive and a Covered Bond Regulation to harmonize covered bond legislation across the Member States of the EU. Member States are required to adopt and publish laws, rules and regulations by July 8, 2021 necessary to comply with the Directive, which shall be effective not later than July 8, 2022. Covered bonds compliant with the Covered Bond Directive are treated preferentially under the Capital Requirements Directive (as amended by the Covered Bond Regulation) and may qualify for credit quality step 1 under the Liquidity Coverage Requirement Regulation. Covered bonds are defined under the Directive to be covered bonds issued by credit institutions subject to the Capital Requirements Directive. Accordingly, covered bonds issued by Canadian or Australian or other third-country issuers of covered bond will not qualify for preferential treatment under the Capital Requirements and will therefore be less attractive to investors that are EU credit institutions than covered bonds issued by EU credit institutions. This disadvantage is addressed under the Directive by a requirement that “[t]he Commission should therefore, in close cooperation with EBA, assess the need and relevance for an equivalence regime to be introduced for third-country issuers of, and investors in, covered bonds”. And that “[t]he Commission should, no more than two years after the date from which Member States are to apply the provisions of national law transposing this Directive, submit a report thereon to the European Parliament and to the Council, together with a legislative proposal, if appropriate.” The report of the Commission on the need for an equivalence regime therefore needs to be delivered to the European Parliament no later than July 8, 2024. There is no basis to predict when equivalence legislation, if any, might be adopted. The bottom line is that third-country issuers from Canada, Australia and other jurisdictions are likely to be at a disadvantage until at least 2025.