European Covered Bond Council

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Australia
Australian Covered Bonds
Austria
FBS - Fundierte Bankschuldverschreibungen
Pfandbriefe
Belgium
Belgium Covered Bonds
Bulgaria
Bulgarian Covered Bonds
Canada
Canadian Covered Bonds
Cyprus
Cypriot Covered Bonds
Denmark
Realkreditobligationer - RO
Særligt Dækkede Obligationer - SDO
Særligt Dækkede Realkreditobligationer - SDRO
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
Ireland
Asset Covered Securities - ACS
Italy
Obbligazioni Bancarie Garantite - OBG
Luxembourg
Lettres de Gage hypothécaires
Lettres de Gage mobilières
Lettres de Gage publiques
Netherlands
Dutch registered CBs programmes
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
Slovakia
Slovakian Covered Bonds
Spain
Cédulas Hipotecarias - CH
Sweden
Swedish Covered Bonds
Switzerland
Credit Suisse CB
Swiss Pfandbriefe
UBS CB
Turkey
Turkish Covered Bonds
United Kingdom
Regulated Covered Bonds - RCB
Unregulated Covered Bonds
United States
US Covered Bonds

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Questions	Asset Covered Securities - ACS
I. STRUCTURE OF THE ISSUER
1. Who is the issuer?	Specialized credit institution
	(1) Comments: The specialised credit institution is known in the Asset Covered Securities (ACS) framework as a Designated Credit Institution (DCI). DCIs are further designated as a Designated Mortgage Credit Institution, Designated Commercial Mortgage Credit Institution, or a Designated Public Credit Institution to issue each particular types of ACS. DCIs can be authorised to issue more than one type of ACS, though maintaining separate cover pools for each.
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
	(2) Comments: In general the issuer would be the originator of the assets. However, within a group situation assets may be transferred from a parent to its subsidiary Designated Credit Institution. An issuer may also purchase assets on the secondary market.
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
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.) Group originated Senior MBS Senior MBS issued by third parties Exposures to credit institutions
2. What is the geographical scope for public sector assets?	Domestic Multilateral development banks EEA CH USA, Canada, Japan NZ AUS
3. What is the geographical scope for mortgage assets?	Domestic EEA CH USA, Canada, Japan NZ AUS
4. Are regular covered bond specific disclosure requirements to the public mandatory?	Yes
	(3) Comments: DCIs are required to disclose certain information in their annual accounts. A Designated Mortgage Credit Institution or Designated Commercial Mortgage Credit Institution must disclose: • Mortgage accounts and principals outstanding on the mortgage cover pool • Geographical location and details of the pool • Pool accounts in default at year end • The number of non-performing mortgage credit assets replaced during the financial year • The total amount of interest in arrears in respect of mortgage credit assets that has not been written of at the end of the financial year • The total amount of payments of principal and interest repaid in respect of mortgage credit assets A Designated Public Credit Institution must disclose the names of countries for the location of those assets, the number of assets, and percentage of overall pool.
	(4) Global comments for this chapter:Where a DCI is authorised to issue more than one type of ACS, the different asset classes (Public Sector, Mortgage, and Commercial Mortgage) must be maintained in separate cover pools.
IV. VALUATION OF THE MORTGAGE COVER POOL & LTV CRITERIA
1. LTV is calculated using which valuation?[4]	Market value
2. Are there any special LTV limits used solely for calculating collateralisation rates for the cover pool (if yes, specify)?	Residential 75% Commercial 60%
3. Do bondholders get the benefit of that portion of the loan which exceeds the LTV cap?	Yes
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?	Yes (if yes specify) 80%
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
	(5) Comments: Yes, 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?	Weekly Monthly
	(6) Comments: Coverage calculations are carried out weekly by public sector DCIs, and monthly for mortgage DCIs. Coverage calculations are also made when assets are entered or removed from the cover pool and when bonds are issued.
6. What types of stress scenarios are applied?	Model based (i.e. VaR)
	(7) Comments: Plus or minus 1% shift in the yield curve, and plus or minus 1% shift in the slope of the yield curve (twisted curve)
7. What is the frequency of stress test calculations?	Daily
. Exposure to liquidity risk
8. Is exposure to liquidity risk required to be mitigated by law or contract?	Yes
	(8) Comments: Yes, by law
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.)
	(9) Comments: For public sector ACS the duration of the assets cannot exceed the duration of the securities by more than 3 years on a weighted average basis. Mortgage ACS issuers have access to the Mortgage Backed Promissory Note programme, under which they can use mortgage assets not allocated to the ACS programme to access liquidity through the ECB. Furthermore, mortgage ACS tend to have 12 month extendable maturity.
10. What is the primary method for the mitigation of liquidity risk on principal payments?
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?	Programme freeze (neither sale of assets nor new issuance allowed)
	(10) Comments: A number of actions are possible from the Financial Regulator, including programme freeze or removal of licence.
. Monitoring of exposures to market and liquidity risk
13. Who monitors the maintenance of coverage tests?	Supervisory authority Rating agency Trustee/cover pool monitor
14. Are there any regular public reporting requirements for market and liquidity risk?	Yes
	(11) Comments: The DCI’s market risk and liquidity risk exposures are reported in the annual financial accounts.
. Overcollateralisation
15. Is mandatory minimum overcollateralisation required?	By legislation/regulation By contractual obligation
16. What is the level of minimum mandatory overcollateralisation?	103%
	(12) Comments: 103%, but 110% for Commercial Mortgage ACS. The regulatory minimum OC is calculated on a PV basis. In addition, ACS issuers have committed contractually to 105% OC on a nominal 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?	Programme freeze (neither sale of assets nor new issuance allowed) Other regulatory or rule-based actions
	(13) Comments: A number of actions are possible from the Financial Regulator, including programme freeze or removal of licence.
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?	To check whether eligibility criteria are fulfilled and documented Checking quality of cover assets (real estate valuations, etc) 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 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 Other, please specify: Sign off on all assets being placed in or removed from the cover pool
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
	(14) Comments: All assets (public sector or mortgage), substitution assets, cover assets and hedge contracts 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
	(15) Comments: The hedges survive pursuant to the terms of their contracts.
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
4. Are there any special investment regulations regarding covered bonds?	No
IX. ADDITIONAL INFORMATION
1. Link to National Association representing covered bond interests	Association Irish banking Federation (ACS Ireland)
2. Link to national regulators and supervisors	List Central Bank of Ireland
3. Fact Book Country Chapter	Chapter
	Ireland
4. Hypostat Country Chapter	Chapter
	Ireland.pdf

Comments for your selection

1: The specialised credit institution is known in the Asset Covered Securities (ACS) framework as a Designated Credit Institution (DCI). DCIs are further designated as a Designated Mortgage Credit Institution, Designated Commercial Mortgage Credit Institution, or a Designated Public Credit Institution to issue each particular types of ACS. DCIs can be authorised to issue more than one type of ACS, though maintaining separate cover pools for each.
2: In general the issuer would be the originator of the assets. However, within a group situation assets may be transferred from a parent to its subsidiary Designated Credit Institution. An issuer may also purchase assets on the secondary market.
3: DCIs are required to disclose certain information in their annual accounts. A Designated Mortgage Credit Institution or Designated Commercial Mortgage Credit Institution must disclose: • Mortgage accounts and principals outstanding on the mortgage cover pool • Geographical location and details of the pool • Pool accounts in default at year end • The number of non-performing mortgage credit assets replaced during the financial year • The total amount of interest in arrears in respect of mortgage credit assets that has not been written of at the end of the financial year • The total amount of payments of principal and interest repaid in respect of mortgage credit assets A Designated Public Credit Institution must disclose the names of countries for the location of those assets, the number of assets, and percentage of overall pool.
4: Where a DCI is authorised to issue more than one type of ACS, the different asset classes (Public Sector, Mortgage, and Commercial Mortgage) must be maintained in separate cover pools.
5: Yes, by law
6: Coverage calculations are carried out weekly by public sector DCIs, and monthly for mortgage DCIs. Coverage calculations are also made when assets are entered or removed from the cover pool and when bonds are issued.
7: Plus or minus 1% shift in the yield curve, and plus or minus 1% shift in the slope of the yield curve (twisted curve)
8: Yes, by law
9: For public sector ACS the duration of the assets cannot exceed the duration of the securities by more than 3 years on a weighted average basis. Mortgage ACS issuers have access to the Mortgage Backed Promissory Note programme, under which they can use mortgage assets not allocated to the ACS programme to access liquidity through the ECB. Furthermore, mortgage ACS tend to have 12 month extendable maturity.
10: A number of actions are possible from the Financial Regulator, including programme freeze or removal of licence.
11: The DCI’s market risk and liquidity risk exposures are reported in the annual financial accounts.
12: 103%, but 110% for Commercial Mortgage ACS. The regulatory minimum OC is calculated on a PV basis. In addition, ACS issuers have committed contractually to 105% OC on a nominal basis.
13: A number of actions are possible from the Financial Regulator, including programme freeze or removal of licence.
14: All assets (public sector or mortgage), substitution assets, cover assets and hedge contracts on the cover register
15: The hedges survive pursuant to the terms of their contracts.