Comments for your selection

• 1: Banks licensed under the Bank Act, Industrial Bank of Korea, Korea Development Bank, NH Bank, National Federation of Fisheries Cooperative - Credit Business Division each of which with equity capital of not less than KRW 100 billion and BIS ratio of not less than 10%, Korea Housing Finance Corporation and Korea Finance Corporation
• 2: Covered Bond holders, derivative counterparties related to Covered Bonds, other priority creditors including those with fees due shall have a priority right of payment on the registered Cover Pool over third parties. In case of bankruptcy of an issuer, the Cover Pool shall not be subject to bankruptcy proceeding, including compulsory execution, preservative measure and stay order with respect to such issuer. If the issuer becomes insolvent prior to repaying all of the principal of the Covered Bonds outstanding, the priority creditors have the right to participate in the bankruptcy proceedings of the issuers alongside other unsecured creditors of the issuer.
• 3: The Covered Bond Act was passed by the National Assembly of Korea on December 19, 2013 and will come into effect 3 months after it is promulgated
• 4: The Covered Bond Act stipulates that the cover pools of the issuers which are registered with the Financial Supervisory Service will not be subject to insolvency proceedings of the issuers
• 5: Cover Pool: residential mortgages, debts issued by public sector with LTV of less than 70%, vessel mortgages and aircraft mortgages with LTV of less than 70% Liquid Assets: liquid assets such as cash, Certificate of Deposits issued by other financial institutions with maturity shorter than 100 days Other assets: recoveries from Cover Pool or Liquid Assets, derivative instruments etc. The following liquid assets may be registered as Cover Pool up to a limit of 10% of total value of the Cover Pool. 1. Cash 2. Certificates of Deposit issued by other financial institutions with maturity shorter than 100 days 3. Deposits, overdraft facilities, discounted bills, credit card receivables etc with maturity shorter than 3 months 4. Debt issued by central or local governments of OECD member countries or the Kingdom of Saudi Arabia 5. Financial instruments similar to certificate of deposit with maturity shorter than 100 days which have been issued by central banks, commercial banks, investment banks, securities companies etc with an international credit rating of 'A' or above from either an OECD member country or the Kingdom of Saudi Arabia
• 6: The issuer and the Cover Pool monitor are required to submit quarterly reports to the financial regulatory authority using the form of report setting out details relating to Covered Bonds and Cover Pool. The issuer is required to publish such information on the relevant website and must include such details as notes to the annual report of such issuer.
• 7: No
• 8: Portion of the assets which exceed the required LTV shall not be eligible cover asset but shall be treated as being part of the Cover Pool unless the Cover Pool registration with respect to such portion of assets are cancelled. The right of priority shall also not be affected.
• 9: In all cases 70%
• 10: Assets which do not satisfy the LTV requirement will be non-eligible assets and must be replaced with assets which satisfy the eligibility criteria including the LTV ratio and the minimum coverage ratio should be maintained.
• 11: The total value of Cover Pool is greater than or equal to 105% of the nominal value of the Covered Bonds outstanding
• 12: Where the currency of the Covered Bonds is different from the currency of the cover pool, the spot exchange rate prevailing on the calculation date shall be used to make the relevant calculations. Where the issuer has hedged its currency risk through derivative transactions, the exchange rate set out in such derivative contract may be utilised and the derivative counterparty will also be treated as a priority creditor under the Covered Bond Act.
• 13: Where the cover pool consists of mortgages, any mortgages in arrears will be calculated by applying certain ratios and the other assets shall be valued using market values. Any assets which are not eligible assets and any derivative instruments entered into for hedging purposes shall be valued at '0'.
• 14: There are no separate provisions dealing with liquidity risk in the Covered Bond Act. There are no precedents as the Covered Bond Act has not yet come into effect but the covered bonds issued pursuant to the Korea Housing Finance Corporation Act requires the issuer to make contractual provisions for interest payments, commissions and fees payable for a certain period of time and it is expected that the covered bonds issued under the Covered Bond Act will also likely stipulate such reserve requirements to mitigate liquidity risk by way of contractual provisions.
• 15: The total value of Cover Pool (public valuation) is greater than or equal to 105% of the Covered Bonds outstanding.
• 16: It must be an entity who was not a 'special relation person' of the issuer in the preceding 3 years
• 17: 1. Monitor and evaluate the issuer's issue plans and compliance with the relevant laws and regulations 2. Require compliance of the issuer 3. direct and supervise the trustee's operations 4. any legal or non-legal actions related to managing and disposing of primary assets for the priority creditors
• 18: It is expected that derivative contracts may be required to continue by way of contractual provisions as the derivative counterparty is also a priority creditor under the Covered Bond Act
• 19: The structured covered bonds were issued by Kookmin Bank pursuant to the Asset Backed Securities Act in May 2009 and the Korea Housing Finance Corporation issued statutory covered bonds pursuant to the Korea Housing Finance Corporation Act in July 2010 with subsequent issues of both cross border and domestic statutory covered bonds.