Comments for your selection

• 1: [Issuers are currently all OSFI (Office of the Superintendent of Financial Instituitons) regulated Canadian financial institutions]
• 2: The cover assets are sold to a bankruptcy remote, special purpose entity – the Guarantor. The Guarantor is typically consolidated on the Issuer's balace sheet
• 3: All issuers are required to publish rating agency and investor reports monthly or quarterly under their programme documents.
• 4: The Canadian covered bond programs can, and in certain cases currently do include either a portion or 100% Canadian government insured residential mortgages. Canadian dollar denominated residential mortgage backed securities and short term provincial and federal bonds and money market securities can form part of the cover pool as substitute assets / authorized investments, up to a maximum of 10% of the C$ equivalent of the outstanding Covered Bonds
• 5: Canada only
• 6: Canada Only
• 7: All issuers are required to publish rating agency and investor reports monthly or quarterly under their programme documents.
• 8: LTV calculated based on appraised market value at origination. Indexing is not factored into the ACT calculation
• 9: For the purposes of the Asset Coverage Test a maximum of 80% LTV (uninsured mortgages) and 90% LTV (insured mortgages) is factored into the calculation of the Adjusted Aggregate Loan Amount
• 10: There is no LTV cap on loans that can be included in the pool, however the LTV cap applies when calculating the Asset Coverage Test
• 11: By contract
• 12: Interest rate and exchange rate swaps
• 13: Both the interest rate and exchange rate swaps are signed at closing. Cash flows are exchanged under the interest rate swap immediately. Cash flows under the exchange rate swap are only exchanged following an Issuer Event of Default
• 14: By contract
• 15: The issuer is required to stress test the cover pool in determining the Asset Percentage which ensures the cover pool is adequate, at all times, to cover all claims attaching to the outstanding covered bonds. The rating agencies ensure the Asset Percentage determined is adequate to maintain the current rating of the covered bonds In addition, a reserve fund is required to be funded by the Guarantor following a downgrade of the Issuer below A-1+(S&P), P-1(Moody’s), F1(Fitch) or R-1(middle)/A(high) (DBRS)
• 16: The issuer is required to stress test the cover pool in determining the Asset Percentage which ensures the cover pool is adequate, at all times, to cover all claims attaching to the outstanding covered bonds. The rating agencies ensure the Asset Percentage determined is adequate to maintain the current rating of the covered bonds In addition, the outstanding Canadian covered bonds have soft bullet maturities, which allow for a twelve month extension. Hard bullet covered bonds can currently be issued under one program, which incorporates a pre-maturity test. This requires the issuer to cash-collateralise hard bullet maturities six months before maturity if a ratings trigger is breached
• 17: If the Asset Coverage Test is not met on a calculation date, an ACT Breach Notice is served to the Issuer. If the Issuer fails to cure the ACT breach by transferring additional cover assets or cash to the Guarantor by the following calculation date, an Issuer Event of Default occurs. in addition, default by the Issuer on any other obligation under the covered bonds for more than 30 days constitutes an Issuer Event of Default
• 18: The above items are all possible consequences of a breach
• 19: An independent audit firm (the Asset Monitor) will test the calculation of the ACT performed by the Issuer (as Cash Manager) on an annual basis. However, if the rating of the Cash Manager has been downgraded below the trigger level stipulated by the rating agencies or if an ACT Breach Notice has been served on the Issuer and not yet revoked, the Asset Monitor will test the calculation on a monthly basis, until the situation is resolved. In addition, if the test reveals an error in the ACT calculation, the Asset Monitor will test the calculation monthly for a period of six months. The rating agencies confirm that the asset percentage applied in calculating the ACT is adequate to maintain the rating of the covered bonds
• 20: The investor and rating agency reports typically outline the calculation of the ACT and the level of coverage available
• 21: All four existing programs have stipulated a maximum Asset Percentage of 97%, which ensures a minimum overcollateralisation of at least 3%
• 22: If the Asset Coverage Test is not met on a calculation date, an ACT Breach Notice is served to the Issuer. If the Issuer fails to cure the ACT breach by transferring additional cover assets or cash to the Guarantor by the following calculation date, an Issuer Event of Default occurs.
• 23: The above items are all possible consequences of a breach
• 24: No specific license is required, however all the existing Issuers are regulated by OSFI and as such are required to comply with the maximum issuance limit stipulated by OSFI - currently 4% of total assets
• 25: Issuers are currently limited by OSFI to issuance up to 4% of total assets
• 26: The Issuer’s audit firm typically acts as the Asset Monitor
• 27: Collateral audits are typically performed prior to filing the initial base shelf prospectus and may be performed on renewal of the programs erification of ACT performed annually unless a ratings trigger is breached or an error is made in the calculation, in which case calculations are checked monthly
• 28: The Guarantor will continue to service the cover pool and make the required payments due under the covered bonds. The Guarantor may sell the assets in the covered pool as required
• 29: A legal true sale of the assets to the bankrupcy remote Guarantor.
• 30: Recourse for any shortfalls on outstanding covered bonds not covered by the Cover Pool
• 31: The SPE which holds the cover assets enters into all derivatives directly. The swap counterparty at closing is the Issuer. The Issuer is required to post collateral following downgrade below stipulated ratings levels. Upon further downgrade, the Issuer is required to be replaced as swap counterparty
• 32: The interest rate swap is senior to CB holders. The exchange rate swap is pari-passu, once cash flows start flowing under this swap (following an Issuer Event of Default)
• 33: The Euro denominated Covered Bonds are eligible to be used as collateral in repo transactions with the ECB, however are not eligible for repo transactions with the Bank of Canada as they are not C$ denominated