Select Framework(s)
Results are displayed below
- Australia
- Australian Covered Bonds
- Austria
- FBS - Fundierte Bankschuldverschreibungen
- Pfandbriefe
- Belgium
- Belgium Covered Bonds
- Brazil
- Brazil Covered Bonds
- Bulgaria
- Bulgarian Covered Bonds
- Canada
- Canadian Covered Bonds
- Chile
- Bonos Hipotecarios (BH) - Chilean Covered Bonds
- Cyprus
- Cypriot Covered Bonds
- Czech Republic
- Czech Republic Covered Bonds
- Denmark
- Realkreditobligationer - RO
- Særligt Dækkede Obligationer - SDO
- Særligt Dækkede Realkreditobligationer - SDRO
- Estonia
- Estionian Covered Bonds
- Finland
- Finnish Covered Bonds
- France
- Caisse de Refinancement de l'Habitat - CRH
- General Law Based CBs
- Obligations Foncières - OF
- Obligations à l'Habitat - OH
- Germany
- Pfandbriefe
- Greece
- Greek Covered Bonds
- Hungary
- Hungarian Covered Bonds
- Iceland
- Icelandic Covered Bonds
- Ireland
- Asset Covered Securities - ACS
- Italy
- Obbligazioni Bancarie Garantite - OBG
- Luxembourg
- Lettres de Gage hypothécaires
- Lettres de Gage mobilières
- Lettres de Gage mutuelles
- Lettres de Gage publiques
- Netherlands
- Dutch registered CBs programmes
- New Zealand
- New Zealand Covered Bonds
- Norway
- Norwegian Covered Bonds
- Poland
- Polish Covered Bonds
- Portugal
- Mortgage CB (Obrigações Hipotecárias)
- Public Sector CB (Obrigações sobre o Sector Público)
- Romania
- Obligatiuni Ipotecare - Mortgage Covered Bonds
- Russia
- Mortgage Obligations
- Singapore
- Singapore Covered Bonds
- Slovakia
- Slovakian Covered Bonds
- Slovenia
- Slovenian Covered Bonds
- South Korea
- South Korean Covered Bonds
- Spain
- Cédulas Hipotecarias - CH
- Sweden
- Swedish Covered Bonds
- Switzerland
- Swiss Pfandbriefe
- Contractual Covered Bonds
- Credit Suisse CB
- UBS CB
- Valiant
- Turkey
- Turkish Covered Bonds
- United Kingdom
- Regulated Covered Bonds - RCB
- Unregulated Covered Bonds
- United States
- US Covered Bonds
Select Chapter(s)
- I. STRUCTURE OF THE ISSUER
- II. FRAMEWORK
- III. COVER ASSETS
- IV. VALUATION OF THE MORTGAGE COVER POOL & LTV CRITERIA
- V. ASSET-LIABILITY GUIDELINES
- VI. COVER POOL MONITOR & BANKING SUPERVISION
- VII. SEGREGATION OF ASSETS & BANKRUPTCY REMOTENESS OF COVERED BONDS
- VIII. RISK WEIGHTING & COMPLIANCE WITH EUROPEAN LEGISLATION
- IX. ADDITIONAL INFORMATION
Questions | Canadian Covered Bonds |
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I. STRUCTURE OF THE ISSUER | |
1. Who is the issuer? |
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(1) Comments: All issuers are regulated by OSFI (Office of the Superintendent of Financial Institutons), although one issuer is a cooperative financial institution in Canada that is subject to provincial regulation. | |
2. Does the bondholder have recourse to the credit institution? |
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3. Who owns the cover assets? |
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(2) Comments: The cover assets are sold to a bankruptcy remote, special purpose entity – the Guarantor. | |
4. Is the issuer the originator of the assets? |
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(3) Comments: Most of the mortgages in the pool would be originated by the issuer, however this is not a legal requirement. An issuer could purchase mortgages from another entity and include them in the pool if they meet the requirements. Also substitute assets (GoC bonds) can be included in the cover pool and they are not by definition originated by the issuer. | |
II. FRAMEWORK | |
1. Are the bonds governed by a special covered bond Legislation? |
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(4) Comments: The legal framework includes the statutory provisions of the National Housing Act as well as additional conditions and restrictions set out in the Canadian Registered Covered Bond Programs Guide. | |
2. What is the legal framework for bankruptcy of the issuer of covered bonds? |
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III. COVER ASSETS | |
1. What types of assets may be included in cover pools? |
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(5) Comments: Only uninsured mortgages with maximum 80% LTV allowed. Exposure to public sector entities is limited to securities issued by the Government of Canada and only up to 10% of the cover pool. | |
2. What is the geographical scope for public sector assets? |
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(6) Comments: Canada only. | |
3. What is the geographical scope for mortgage assets? |
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(7) Comments: Canada only. | |
4. Are regular covered bond specific disclosure requirements to the public mandatory? |
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(8) Comments: Issuers are required to post all programme documents, transaction information and monthly investor reports on its website. | |
IV. VALUATION OF THE MORTGAGE COVER POOL & LTV CRITERIA | |
1. LTV is calculated using which valuation?[4] |
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(9) Comments: LTV is calculated based on indexed values for the ACT calculation. | |
2. Are there any special LTV limits used solely for calculating collateralisation rates for the cover pool (if yes, specify)? |
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3. Do bondholders get the benefit of that portion of the loan which exceeds the LTV cap? |
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4a. Is there an LTV cap which makes the entire loan ineligible to be put in the cover pool (if yes, specify)? |
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(10) Comments: Mortgages higher than 80% LTV are not allowed to be added to the cover pool. | |
4b. Is there an LTV cap which would require a loan to be removed from the cover pool? |
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(11) Comments: However, the amounts in excess of the 80% (as a result of indexation) cannot be included for purposes of the Asset Coverage Test, Valuation Test and Amortisation Test. | |
5. Is there any additional LTV limit on a portfolio basis? |
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V. ASSET-LIABILITY GUIDELINES | |
. Exposure to market risk | |
1. Is exposure to market risk (e.g. interest rate, currency risks) required to be mitigated by law or contract? |
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(12) Comments: Market risk hedging is required by Law. | |
2. What is the primary method for the mitigation of market risk? |
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(13) Comments: Balance guarantee swap and covered bond swap is used to hedge market risk. | |
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: |
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4. What type of coverage test is applied? |
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(14) Comments: Market risk is considered by the Rating Agencies in coming up with the required Asset Percentage level. | |
5. What is the frequency of coverage calculations? |
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(15) Comments: ACT is calculated monthly and disclosed in the monthly investor report. | |
6. What types of stress scenarios are applied? |
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(16) Comments: Market risk is fully hedged at the time of cover pool addition and at each issuance. | |
7. What is the frequency of stress test calculations? |
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. Exposure to liquidity risk | |
8. Is exposure to liquidity risk required to be mitigated by law or contract? |
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9. What is the primary method for the mitigation of liquidity risk on interest payments? |
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(17)
Comments: 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 as prescribed by rating agencies. |
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10. What is the primary method for the mitigation of liquidity risk on principal payments? |
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(18) Comments: Generally, Canadian Covered Bonds have soft bullet maturities, which allow for twelve month extension. In addition, the Canadian Registered Covered Bond Programmes Guide requires ratings triggers to be prescribed for pre-maturity tests to ensure covered bond collateral includes sufficient cash to satisfy all principal payments due under all series or tranches of hard bullet covered bonds maturing during a period described in the issuer's transaction documents together with all payments ranking in priority to repayment of such principal. | |
11. Is there any grace period in case of a breach of liquidity risk mitigants? |
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(19) Comments: 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. | |
12. What is the consequence of not fixing a breach of liquidity risk mitigants? |
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. Monitoring of exposures to market and liquidity risk | |
13. Who monitors the maintenance of coverage tests? |
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(20) Comments: Cover pool monitor also monitors maintenance of coverage tests. | |
14. Are there any regular public reporting requirements for market and liquidity risk? |
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(21) Comments: Valuation calculation and ACT test is reported in the monthly investor report on Issuers website. | |
. Overcollateralisation | |
15. Is mandatory minimum overcollateralisation required? |
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16. What is the level of minimum mandatory overcollateralisation? |
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(22) Comments: Contractual overcollaterialisation is driven by rating agency requirements. | |
17. If mandatory overcollateralisation is required, are the amounts above the minimum OC level protected? |
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18. Is there any grace period in case of a breach of the coverage test? |
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19. What is the consequence of not fixing a breach of the coverage test? |
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VI. COVER POOL MONITOR & BANKING SUPERVISION | |
1. Is a special license required for the issuing of covered bonds? |
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(23) Comments: Issuer needs to be registered with the CMHC, Canadian Covered Bond Administrator. | |
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? |
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3. What is the role of the banking supervision regarding covered bonds? |
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(24) Comments: These roles are performed by the Covered Bond Administrator. | |
4. Is there a special role of banking supervision in crisis regarding covered bonds? |
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(25) Comments: There would be roles but not necessarily those described above. | |
5. Is there a cover pool monitor independent from the issuer? |
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6. If there is an independent cover pool monitor, what are its duties? |
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VII. SEGREGATION OF ASSETS & BANKRUPTCY REMOTENESS OF COVERED BONDS | |
1. Do covered bonds automatically accelerate when the credit institution goes insolvent? |
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(26) Comments: 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. | |
2. What is the cover pool? |
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3. How are the covered bondholders protected against claims from other creditors in case of insolvency of the issuer? |
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4. Is there recourse to the credit institution’s insolvency estate upon a cover pool default? |
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(27) Comments: Recourse for any shortfalls on outstanding covered bonds not covered by the Cover Pool. | |
5. Are there provisions that require derivatives to continue in case of insolvency of the credit institution? |
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(28) Comments: 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. | |
6. If derivatives are permitted in the cover pool, what is their ranking? |
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(29) Comments: The interest rate swap is senior to covered bond holders. The exchange rate swap is pari-passu, once cash flows start flowing under this swap (following an Issuer Event of Default). Covered Bond swap payments rank pari passu to the claims of covered bond holders. | |
VIII. RISK WEIGHTING & COMPLIANCE WITH EUROPEAN LEGISLATION | |
1. Does the covered bond fulfil the criteria of UCITS 52(4)? |
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(30) Comments: Canadian covered bonds are a Level 2A liquid asset in relation to European liquidity regulations. | |
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? |
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(31) Comments: The Euro denominated covered bonds are eligible to be used as collateral in repo transactions with the ECB and Canadian dollar denominated covered bonds are eligible for repo transactions with the Bank of Canada. | |
4. Are there any special investment regulations regarding covered bonds? |
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IX. ADDITIONAL INFORMATION | |
1. Link to National Association representing covered bond interests |
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(32) Comments: http://www.cmhc-schl.gc.ca/en/hoficlincl/cacobo/cacobo_004.cfm | |
2. Link to national regulators and supervisors |
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(33) Comments: You can get link to individual Issuer website through the CMHC's Covered Bond registry link above. | |
3. Fact Book Country Chapter |
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4. Hypostat Country Chapter |
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