Polish Covered Bonds

1 Who is the issuer?
  • Specialized credit institution
  Comments: Apart from the mortgage banks, also 1 state bank (Bank Gospodarstwa Krajowego) is allowed to issue covered bonds in Poland.
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
2 What is the legal framework for bankruptcy of the issuer of covered bonds?
  • Specific legal framework superseding the general insolvency law
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.)
2 What is the geographical scope for public sector assets?
  • Domestic
  • EEA
  • OECD
  Comments: Domestic assets for municipalities loans (Polish Covered Bond and Mortgage Banks Act, Art.3 para 4).
Polish Covered Bond and Mortgage Banks Act, Ariticle 3. para 2. A public mortgage bond is a registered or bearer security issued on the basis of receivables of a mortgage bank arising from:
1) credits within the secured part with due interest, a guarantee or surety of the National Bank of Poland, the European Central Bank, governments or central banks of the EU Member States, the Organisation for Economic Cooperation and Development, except for states which are currently in the process of restructuring of restructured their foreign debts during the last 5 years, as well as a guarantee or surety of the State Treasury in accordance with provisions of separate laws; or
2) credits granted to entities listed in point 1); or
3) credits in the secured part with due interest, a guarantee or surety of local government units and credits granted to such local government units.
3 What is the geographical scope for mortgage assets?
  • Domestic
4 Are regular covered bond specific disclosure requirements to the public mandatory?
  • Yes
  Comments: Based on Art. 26 of the Polish Covered Bond and Mortgage Banks Act and various obligations from the Trading in financial instruments act.
1 LTV is calculated using which valuation?[4]
  • Mortgage lending value
2 Are there any special LTV limits used solely for calculating collateralisation rates for the cover pool (if yes, specify)?
  • Residential      
    80%
  • Commercial      
    60%
3 Do bondholders get the benefit of that portion of the loan which exceeds the LTV cap?
  • Yes
4a Is there an LTV cap which makes the entire loan ineligible to be put in the cover pool (if yes, specify)?
  • Residential      
  • Commercial      
  Comments: 100% LTV cap for both residential and commercial loans. This cap referes not only to cover pool ineligibility, it is a general cap (total LTV cap) - Art. 13 para 2. of the Polish Covered Bond and Mortgage Banks Act.
4b Is there an LTV cap which would require a loan to be removed from the cover pool?
  • Residential      
  • Commercial      
5 Is there any additional LTV limit on a portfolio basis?
  • Yes (if yes specify)
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: Only currency risk is required to be mitigated by law.
2 What is the primary method for the mitigation of market risk?
  • Use of derivative hedge instruments
  Comments: In particular, Interest Rate Swaps (IRS) and Cross-Currency Interest Rate Swaps (CIRS).
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
  Comments: There are two coverage tests: one on a semi-annual basis verifying relation of nominal values of cover pool, liquidity buffer to covered bonds and liquidation costs, second test on a daily basis verifying relation of nominal values of cover pool to covered bonds, relation of cover pool interest to covered bonds interest and level of liquidity buffer.
5 What is the frequency of coverage calculations?
  • Daily
6 What types of stress scenarios are applied?
  • Static
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?
  • No
Overcollateralisation
15 Is mandatory minimum overcollateralisation required?
  • By legislation/regulation
  • By contractual obligation
16 What is the level of minimum mandatory overcollateralisation?
  • 10%
17 If mandatory overcollateralisation is required, are the amounts above the minimum OC level protected?
  • Yes
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
  • Evaluation of operational risk
4 Is there a special role of banking supervision in crisis regarding covered bonds?
  • Involvement in transfer of cover assets and covered bonds to another credit institution
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
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?
  • No
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?
  • Yes
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