Czech Republic Covered Bonds

1 Who is the issuer?
  • Universal credit institution
2 Does the bondholder have recourse to the credit institution?
  • Yes, direct
3 Who owns the cover assets?
  • The issuer directly
4 Is the issuer the originator of the assets?
  • Yes
1 Are the bonds governed by a special covered bond Legislation?
  • Yes
  Comments: Governed by the Bond Act no. 190/2004 Coll.
2 What is the legal framework for bankruptcy of the issuer of covered bonds?
  • General insolvency law
1 What types of assets may be included in cover pools?
  • Mortgage loans (Mortgage loans for the purpose of this question are taken to include guaranteed real-estate loans.)
2 What is the geographical scope for public sector assets?
  Comments: Not relevant as PSA may not be included in a cover pool
3 What is the geographical scope for mortgage assets?
  • EEA
4 Are regular covered bond specific disclosure requirements to the public mandatory?
  • No
1 LTV is calculated using which valuation?[4]
  • Market value
2 Are there any special LTV limits used solely for calculating collateralisation rates for the cover pool (if yes, specify)?
  • Residential      
  • Commercial      
  • Agricultural
  Comments: 70% portfolio LTV limit is required. By "Agricultural" we understand "Agricultural land and/or buildings"
3 Do bondholders get the benefit of that portion of the loan which exceeds the LTV cap?
  • Yes
  Comments: Yes, provided that the portfolio LTV limit (70%) is not met.
4a Is there an LTV cap which makes the entire loan ineligible to be put in the cover pool (if yes, specify)?
  • Residential      
  • Commercial      
  • Agricultural      
  Comments: LTV cap for residential, commercial and agricultural is 200%

Yes, a loan is ineligible if the individual LTV exceeds 200%. By "Agricultural" we understand "Agricultural land and/or buildings"
4b Is there an LTV cap which would require a loan to be removed from the cover pool?
  • Residential      
  • Commercial      
  • Agricultural      
  Comments: Yes, if the individual LTV exceeds 200%. By "Agricultural" we understand "Agricultural land and/or buildings"
5 Is there any additional LTV limit on a portfolio basis?
  • No
  Comments: No other than the 70% portfolio LTV limit.
Exposure to market risk
1 Is exposure to market risk (e.g. interest rate, currency risks) required to be mitigated by law or contract?
  • No
2 What is the primary method for the mitigation of market risk?
  Comments: Not relevant as no derivatives are eligible to be included in a cover pool.
3 If the answer to the above question on market risk mitigation is “Use of derivative hedge instruments”, please specify whether those instruments are entered into:
  • Not relevant
4 What type of coverage test is applied?
  • Nominal cover
5 What is the frequency of coverage calculations?
  • Daily
  Comments: The bank has to be able to prove the coverage has always been sufficient.
6 What types of stress scenarios are applied?
  • Not relevant
7 What is the frequency of stress test calculations?
  • Not relevant
Exposure to liquidity risk
8 Is exposure to liquidity risk required to be mitigated by law or contract?
  • No
9 What is the primary method for the mitigation of liquidity risk on interest payments?
  Comments: Not relevant as the liquidity risk of a cover pool is not required to be mitigated. The liquidity risk is, however, managed by a bank but not isolated from other (i.e. not eligible for a cover pool) transactions.
10 What is the primary method for the mitigation of liquidity risk on principal payments?
  Comments: Not relevant as the liquidity risk of a cover pool is not required to be mitigated. The liquidity risk is, however, managed by a bank but not isolated from other (i.e. not eligible for a cover pool) transactions.
11 Is there any grace period in case of a breach of liquidity risk mitigants?
  Comments: Not relevant as there are no liquidity risk mitigants defined.
12 What is the consequence of not fixing a breach of liquidity risk mitigants?
  Comments: Not relevant as there are no liquidity risk mitigants defined.
Monitoring of exposures to market and liquidity risk
13 Who monitors the maintenance of coverage tests?
  • Supervisory authority
  • Rating agency
  • Trustee/cover pool monitor
  Comments: Rating agency and Trustee not as statutory monitors but on contractual basis only.
14 Are there any regular public reporting requirements for market and liquidity risk?
  • Yes
  Comments: Under CRD IV, CRR and related rules/legislation applicable to a credit institution as the Issuer, not specific to covered bonds and cover pool.
Overcollateralisation
15 Is mandatory minimum overcollateralisation required?
  Comments: No, but may be established contractually.
16 What is the level of minimum mandatory overcollateralisation?
  • 0%
  Comments: See V.15
17 If mandatory overcollateralisation is required, are the amounts above the minimum OC level protected?
  • No
18 Is there any grace period in case of a breach of the coverage test?
  • No
19 What is the consequence of not fixing a breach of the coverage test?
  • Programme freeze (neither sale of assets nor new issuance allowed)
  • Alternative administration
  • Other regulatory or rule-based actions
  • Event of default of the issuer
1 Is a special license required for the issuing of covered bonds?
  • No, but with additional requirements
2 Are there special reporting duties of the covered bond issuer to the supervision authority concerning covered bonds and the cover pool, which go beyond the regular banking supervision?
  • Periodic reporting required
3 What is the role of the banking supervision regarding covered bonds?
  • To check whether eligibility criteria are fulfilled and documented
4 Is there a special role of banking supervision in crisis regarding covered bonds?
  • No specific role
5 Is there a cover pool monitor independent from the issuer?
  • Yes
  Comments: Not an obligatory person, on contractual basis only.
6 If there is an independent cover pool monitor, what are its duties?
  • Other, please specify:      
    Depending on the contract between an issuer and a cover pool monitor
1 Do covered bonds automatically accelerate when the credit institution goes insolvent?
  • Yes
2 What is the cover pool?
  • All assets on the cover register
3 How are the covered bondholders protected against claims from other creditors in case of insolvency of the issuer?
  • Preferential claim by law
4 Is there recourse to the credit institution’s insolvency estate upon a cover pool default?
  • Yes, senior to unsecured creditors
5 Are there provisions that require derivatives to continue in case of insolvency of the credit institution?
  • No
  Comments: Derivatives are not permitted in the cover pool.
6 If derivatives are permitted in the cover pool, what is their ranking?
  Comments: Derivatives are not permitted in the cover pool.
1 Does the covered bond fulfil the criteria of UCITS 52(4)?
  • Yes
2 For further information regarding the compliance to the criteria of Article 129 of the Capital Requirements Regulation (CRR), please see the following links: http://ecbc.hypo.org/Content/default.asp?PageID=504#position https://www.coveredbondlabel.com
3 Are listed covered bonds eligible in repo transactions with the national central bank?
  • No
  Comments: Covered bonds are not eligible in repo transactions with Czech National Bank.
4 Are there any special investment regulations regarding covered bonds?
  • No
1 Link to National Association representing covered bond interests
  Comments: The CBA's activities are not limited to covered bonds only. The association deals with other areas of banking business too.
2 Link to national regulators and supervisors
  • List
3 Fact Book Country Chapter
  • Chapter
 
4 Hypostat Country Chapter
  • Chapter