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Questions Finnish Covered Bonds
I. STRUCTURE OF THE ISSUER
1. Who is the issuer?
  • Universal credit institution with a special license
  • 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
  • No
II. FRAMEWORK
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) Comments: included in the Mortgage Credit Bank legislation
III. COVER ASSETS
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.)
  • Exposures to credit institutions
  • Loans to housing associations without mortgage
2. What is the geographical scope for public sector assets?
  • Domestic
  • Multilateral development banks
  • EEA
3. What is the geographical scope for mortgage assets?
  • Domestic
  • EEA
4. Are regular covered bond specific disclosure requirements to the public mandatory?
  • No
IV. VALUATION OF THE MORTGAGE COVER POOL & LTV CRITERIA
1. LTV is calculated using which valuation?[4]
  • Market value
(2) Comments: market value at the moment of granting mortgage loan
2. Are there any special LTV limits used solely for calculating collateralisation rates for the cover pool (if yes, specify)?
  • Residential      
    70%
  • Commercial      
    60%
3. Do bondholders get the benefit of that portion of the loan which exceeds the LTV cap?
  • No
(3) Comments: Bondholders benefit only of registered share (max 70%) of the loan.
4a. Is there an LTV cap which makes the entire loan ineligible to be put in the cover pool (if yes, specify)?
  • Residential      
(4) Comments: LTV of the original loan can be up to 100% (90% recommendation by the FSA) but only 70% LTV of that loan is Cover Pool eligible.
4b. Is there an LTV cap which would require a loan to be removed from the cover pool?
  • Residential      
    70%
  • Commercial      
    60%
(5) Comments: 70% Residential/ 60% Commercial provided that there's no additional collateral available.
5. Is there any additional LTV limit on a portfolio basis?
  • No
(6) Comments: No Portfolio specific LTV limits.
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?
  • Yes
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?
  • Present value cover
5. What is the frequency of coverage calculations?
  • Daily
6. What types of stress scenarios are applied?
  • Static
  • Dynamic
7. What is the frequency of stress test calculations?
  • Monthly
(7) Comments: not defined in the law
. 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?
  • Liquidity facilities
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
  • Liquidity facilities
11. Is there any grace period in case of a breach of liquidity risk mitigants?
  • No
(8) Comments: If not otherwise advised by FSA
12. What is the consequence of not fixing a breach of liquidity risk mitigants?
  • Other regulatory or rule-based action
(9) Comments: Cancelling the licence (FSA)
. Monitoring of exposures to market and liquidity risk
13. Who monitors the maintenance of coverage tests?
  • Supervisory authority
14. Are there any regular public reporting requirements for market and liquidity risk?
  • No
(10) Comments: Reports only to FSA
. Overcollateralisation
15. Is mandatory minimum overcollateralisation required?
  • By legislation/regulation
  • By contractual obligation
16. What is the level of minimum mandatory overcollateralisation?

  • 2%
(11) Comments: 2% of the Net Present Value by the law and issuer/programme specific levels.
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
(12) Comments: If not otherwise advised by FSA.
19. What is the consequence of not fixing a breach of the coverage test?
  • Other regulatory or rule-based actions
(13) Comments: Cancelling the licence (FSA)
VI. COVER POOL MONITOR & BANKING SUPERVISION
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?
  • Monitoring of exposure to market risk and liquidity risk
  • Evaluation of operational risk
  • 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
5. Is there a cover pool monitor independent from the issuer?
  • No
(14) Comments: Issuer monitors the Cover Pool and reports it to FSA. FSA audits the cover pool.
6. If there is an independent cover pool monitor, what are its duties?
(15) Comments: n.a.
VII. SEGREGATION OF ASSETS & BANKRUPTCY REMOTENESS OF COVERED BONDS
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
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
6. If derivatives are permitted in the cover pool, what is their ranking?
  • Pari passu to covered bond holders
VIII. RISK WEIGHTING & COMPLIANCE WITH EUROPEAN LEGISLATION
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)?
  • Yes
3. Are listed covered bonds eligible in repo transactions with the national central bank?
  • Yes
(16) Comments: Also with the ECB.
4. Are there any special investment regulations regarding covered bonds?
  • No
IX. ADDITIONAL INFORMATION
1. Link to National Association representing covered bond interests
  • Association
2. Link to national regulators and supervisors
 
3. Fact Book Country Chapter
  • Chapter
 
4. Hypostat Country Chapter
  • Chapter
 

Comments for your selection

  • 1: included in the Mortgage Credit Bank legislation
  • 2: market value at the moment of granting mortgage loan
  • 3: Bondholders benefit only of registered share (max 70%) of the loan.
  • 4: LTV of the original loan can be up to 100% (90% recommendation by the FSA) but only 70% LTV of that loan is Cover Pool eligible.
  • 5: 70% Residential/ 60% Commercial provided that there's no additional collateral available.
  • 6: No Portfolio specific LTV limits.
  • 7: not defined in the law
  • 8: If not otherwise advised by FSA
  • 9: Cancelling the licence (FSA)
  • 10: Reports only to FSA
  • 11: 2% of the Net Present Value by the law and issuer/programme specific levels.
  • 12: If not otherwise advised by FSA.
  • 13: Cancelling the licence (FSA)
  • 14: Issuer monitors the Cover Pool and reports it to FSA. FSA audits the cover pool.
  • 15: n.a.
  • 16: Also with the ECB.