Australian covered bonds might ride the waves of European industry activism and gain the status of an advantaged credit investment.Tariq Chotani, an analyst with CBA global markets research, summarised European news flow in this way:"Media reports suggest that the European Commission might be close to a final decision on the eligibility criteria of covered bonds for the liquidity coverage ratio with an inclusion of covered bonds from 'third countries' a possibility.""The big clarification the covered bond market has been waiting for," wrote Chotani, "is the status of covered bonds for LCR in Europe.""Under the Basel III liquidity framework rules, covered bonds rated minimum AA‑ are classified as level 2A assets and are subject to a 40 per cent limit and 15 per cent haircut."The details that emerged late last week suggest that covered bonds may enjoy preferential treatment and may be better positioned than that prescribed under the current Basel III.  "The latest details suggest that the final EC rules would not only impose minimum ratings for the covered bond programmes, but also minimum issuer rating and minimum OC levels."Chotani sees this as fortuitous for banks."According to our interpretation of the European Commission's preliminary views, Australian euro‑denominated covered bonds would not have been LCR eligible. "However the details from late last week suggest that there has been a change of heart at the EC. There is a possibility that Australian covered bonds could receive Level 2A status", he concluded.