Swedish Covered Bonds

1 Who is the issuer?
  • Universal credit institution with a special license
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
  Comments: Not always, it differs between institutions.
1 Are the bonds governed by a special covered bond Legislation?
  • Yes
2 What is the legal framework for bankruptcy of the issuer of covered bonds?
  • General insolvency law
  Comments: Some specific legal requirements apply.
1 What types of assets may be included in cover pools?
  • Exposures to public sector entities
  • Mortgage loans (Mortgage loans for the purpose of this question are taken to include guaranteed real-estate loans.)
  • Exposures to credit institutions
  Comments: Exposures to credit insitutions are limited and need certain approval from FSA.
2 What is the geographical scope for public sector assets?
  • EEA
3 What is the geographical scope for mortgage assets?
  • EEA
4 Are regular covered bond specific disclosure requirements to the public mandatory?
  • No
  Comments: All issuer use the National transparency template and publish it at least quarterly.
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      
    75%
  • Commercial      
    60%. And also a limitation of just 10% of the pool.
  • Agricultural
    70%
3 Do bondholders get the benefit of that portion of the loan which exceeds the LTV cap?
  • Yes
  Comments: The bondholders get this benefit in line with other creditors.
4a Is there an LTV cap which makes the entire loan ineligible to be put in the cover pool (if yes, specify)?
  • No
4b Is there an LTV cap which would require a loan to be removed from the cover pool?
  • No
5 Is there any additional LTV limit on a portfolio basis?
  • No
Exposure to market risk
1 Is exposure to market risk (e.g. interest rate, currency risks) required to be mitigated by law or contract?
  • Yes
  Comments: It is mitigated by contract and required to be handled by law.
2 What is the primary method for the mitigation of market risk?
  • “Natural” matching (matching without the use of off-balance sheet instruments) and stress testing
  Comments: Both are used. Natural matching is the primary method but also derivatives are used.
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:
  • By the time of issue of covered bonds or entry of asset in the cover pool
  Comments: It is all hedged in the way that the regulation require and the institute chose to.
4 What type of coverage test is applied?
  • Nominal cover
  • Present value cover
  Comments: These coverage must also be managed through different stress scenarios according to the regulation.
5 What is the frequency of coverage calculations?
  • Daily
  Comments: Legal requirement to always have a present value of assets larger than that of the liabilities.
6 What types of stress scenarios are applied?
  • Static
  • Dynamic
  Comments: Different scenarios to check different risks, like currency movement, intererest rate changes and revaluation of house prices.
7 What is the frequency of stress test calculations?
  • Daily
Exposure to liquidity risk
8 Is exposure to liquidity risk required to be mitigated by law or contract?
  • Yes
9 What is the primary method for the mitigation of liquidity risk on interest payments?
  • “Natural” matching (matching without the use of off-balance sheet instruments) and stress testing (Natural matching is taken to include replacing CBs with new issues, as well as substitute assets.)
10 What is the primary method for the mitigation of liquidity risk on principal payments?
  • Natural matching (matching without the use of off-balance sheet instruments) and stress testing
11 Is there any grace period in case of a breach of liquidity risk mitigants?
  • No
12 What is the consequence of not fixing a breach of liquidity risk mitigants?
  • Other regulatory or rule-based action
Monitoring of exposures to market and liquidity risk
13 Who monitors the maintenance of coverage tests?
  • Supervisory authority
  • Rating agency
  • Trustee/cover pool monitor
14 Are there any regular public reporting requirements for market and liquidity risk?
  • Yes
  Comments: For those that issue from a special company that are under supervision, the most normal model, there are normal reporting requirements.
Overcollateralisation
15 Is mandatory minimum overcollateralisation required?
  • By legislation/regulation
  • By contractual obligation
  • By published voluntary commitments
16 What is the level of minimum mandatory overcollateralisation?
  Comments: The level of the legal overcollateralisation requirement is 2%.
17 If mandatory overcollateralisation is required, are the amounts above the minimum OC level protected?
  • Yes
  Comments: The regulation says that all assets in the cover pool are protected in the same way.
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?
  • Other regulatory or rule-based actions
1 Is a special license required for the issuing of covered bonds?
  • Yes with additional requirements compared to general banking supervision regulations
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
  • Checking quality of cover assets (real estate valuations, etc)
  • Monitoring of exposure to market risk and liquidity risk
  • To check minimum mandatory overcollateralisation requirements
  Comments: All these roles are carried out by the Independent inspector who report to the banking supervision.
4 Is there a special role of banking supervision in crisis regarding covered bonds?
  • Safeguarding ongoing management of the cover pool directly or via a special administrator
  • Involvement in transfer of cover assets and covered bonds to another credit institution
  Comments: That is not regulated, yet.
5 Is there a cover pool monitor independent from the issuer?
  • Yes
6 If there is an independent cover pool monitor, what are its duties?
  • Performing audits of the cover pool
  • Reporting duties to the supervision authority
  • Verification of coverage tests
  • Other, please specify:      
  Comments: Monitor bond and derivative agreements, monitor that valuation of the underlying collaterall is in line with the law and that the matching rules are contucted properly. All revaluations that has occured shall be reviewed. Other kinds of operational risks must be monitored.
1 Do covered bonds automatically accelerate when the credit institution goes insolvent?
  • No
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
  • Specific cover pool administration
4 Is there recourse to the credit institution’s insolvency estate upon a cover pool default?
  • Yes, pari passu with unsecured creditors
5 Are there provisions that require derivatives to continue in case of insolvency of the credit institution?
  • Yes
6 If derivatives are permitted in the cover pool, what is their ranking?
  • Pari passu to covered bond holders
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?
  • Yes
4 Are there any special investment regulations regarding covered bonds?
  • No
1 Link to National Association representing covered bond interests
2 Link to national regulators and supervisors
3 Fact Book Country Chapter
  • Chapter
 
4 Hypostat Country Chapter
  • Chapter