Lettres de Gage hypothécaires

1

Who is the issuer?

Specialized 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
		Comments: Assets purchased in the secondary market are also eligible.

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?	Mortgage loans (Mortgage loans for the purpose of this question are taken to include guaranteed real-estate loans.) Group originated Senior MBS Senior MBS issued by third parties Exposures to credit institutions
		Comments: Exposures to credit institutions are only eligible as substitute assets which are limited to 20% of the nominal amount of the "Lettres de gage hypothécaires" in circulation. The underlying assets of the Senior MBS tranches have to fulfil the requirements of the law.

2	What is the geographical scope for public sector assets?
		Comments: n.a.

3

What is the geographical scope for mortgage assets?

Domestic EEA CH USA, Canada, Japan OECD NZ AUS

4	Are regular covered bond specific disclosure requirements to the public mandatory?	No
		Comments: Voluntary disclosures on a regular basis.

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?

No

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: By law.

2

What is the primary method for the mitigation of market risk?

Use of derivative hedge instruments

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

4

What type of coverage test is applied?

Nominal cover Present value cover

5	What is the frequency of coverage calculations?	Daily Monthly Quarterly
		Comments: Daily: internal, for Special Auditor in case of issue of covered bonds. Monthly: for Supervisory Authority. Quarterly: for Rating Agencies.

6

What types of stress scenarios are applied?

Static

7

What is the frequency of stress test calculations?

Monthly

Exposure to liquidity risk

8	Is exposure to liquidity risk required to be mitigated by law or contract?	Yes
		Comments: According to the law appropriate measures have to be taken by the issuer to ensure all payments of the covered bonds in circulation.

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.)
		Comments: "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 Other
		Comments: External auditor.

14	Are there any regular public reporting requirements for market and liquidity risk?	No
		Comments: Only on a voluntary basis.

Overcollateralisation

15

Is mandatory minimum overcollateralisation required?

By legislation/regulation

16	What is the level of minimum mandatory overcollateralisation?	2%
		Comments: On a nominal and on a net present value basis.

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 Reporting on demand for special occasions

3

What is the role of the banking supervision regarding covered bonds?

To check whether eligibility criteria are fulfilled and documented To check minimum mandatory overcollateralisation requirements

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

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

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
		Comments: The derivatives in the cover pool are not affected by the insolvency proceedings.

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	Does the covered bond legislation completely fall within the criteria of the Annex VI, Part 1, Paragraph 68 (a) to (f) of the Capital Requirements Directive (CRD)?	No
		Comments: The criteria of the covered bond legislation are wider than those of the CRD.

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

Association   ABBL - Luxembourg Bankers' Association

2

Link to national regulators and supervisors

List Commission de Surveillance du Secteur Financier

3	Fact Book Country Chapter	Chapter
		Luxembourg

4	Hypostat Country Chapter	Chapter
		Luxembourg.pdf