The answer to question 1 in the “EBA final draft implementing technical standards On asset encumbrance reporting under Article 100 of Capital Requirements Regulation (CRR)” states “freely available O/C in cover pools that is not necessary to fulfil regulatory requirements would not be deemed to be encumbered for Parts A, B, C and E”. This would suggest that the spirit of the of asset encumbrance reporting is that only the O/C required to meet regulatory requirements is encumbered for Covered Bonds, where the Covered Bond is either issued to external holders or repo’d to third parties. The key here is what constitutes “freely available”. If “freely available” and “freely withdrawable” mean the same thing then one refers to pages 4 and 5 of the ITS attaching to Asset Encumbrance Reporting. The “Credit Enhance and “approval before withdrawal” interpretation is critical. Before allowing assets to be removed from the pool the Covered Asset Monitor (CAM) performs a number of checks. Once the checks are satisfied, the assets can be removed from the Covered Pool. The CAM does not necessarily take in to account rating agency over-collateralisation requirements (unless contractually/legally committed as part of an issuance) in conducting these checks and has no reason not to approve asset removal once these tests are passed. Does the fact that the Assets can be removed once some known checks on the pool are performed mean they are “freely available”? Alternatively, given that the CAM must perform these checks before allowing the assets to be removed mean that CAM approval is required, in which case the “Freely Withdrawable” test is failed. There are further references in the EBA REPORT ON EU COVERED BOND FRAMEWORKS AND CAPITAL TREATMENT issued on July 1st 2014 that suggest the spirit of encumbrance reporting in respect of Covered Bonds is that O/C in cover pools that is not necessary to fulfil regulatory requirements would not be deemed to be encumbered. For example on pages 58 and 59 in the “EBA recommendations on coverage principle and over-collateralisation” legal/regulatory as well as voluntary O/C for targeting a specific rating are discussed in the context of the nature of the commitment to maintain over-collateralisation impacting on the likelihood that the assets constituting the over-collateralisation are kept in the cover pool as scenarios of distress arise, such as the issuer’s default or resolution, approach. The paragraph is as follows: "Over-collateralisation can be maintained on a voluntary basis, as the result of some form of contractual commitment, as a condition to target specific credit ratings and/or due to a legal/regulatory requirement. The different nature of the commitment to maintain over-collateralisation impacts on the likelihood that the assets constituting the over-collateralisation are kept in the cover pool as scenarios of distress arise, such as the issuer’s default or resolution, approach. Those are the circumstances in which the over-collateralisation commitment for the interest of the covered bond investors is more likely to be reduced in favour of interests of a different nature."