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Questions Mortgage Obligations
I. STRUCTURE OF THE ISSUER
1. Who is the issuer?
  • Universal credit institution with a special license
(1) Comments: Issues by SPVs possible, but will not be looked after here.
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) Global comments for this chapter:Overall there are significant changes in the covered bond legislation under discussion.
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
(3) Comments: A specific was to be enacted, but wasn't. New legislation under discussion.
III. COVER ASSETS
1. What types of assets may be included in cover pools?
  • Mortgage loans (Mortgage loans for the purpose of this question are taken to include guaranteed real-estate loans.)
(4) Comments: Additional cover by state bonds or cash is possible.
2. What is the geographical scope for public sector assets?
(5) Comments: No public secotr assets.
3. What is the geographical scope for mortgage assets?
  • Domestic
4. Are regular covered bond specific disclosure requirements to the public mandatory?
  • Yes
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      
    70%
  • Commercial      
    70%
(6) Comments: Buildings under construction not more than 10% of the cover pool.
3. Do bondholders get the benefit of that portion of the loan which exceeds the LTV cap?
(7) Comments: Regularly cover asstes do not exceed the eligible LTV. Majority opinion as of today is, that loans exceeding this LTV at all cannot be part of the cover.
4a. Is there an LTV cap which makes the entire loan ineligible to be put in the cover pool (if yes, specify)?
(8) Comments: See comment to IV.3.
4b. Is there an LTV cap which would require a loan to be removed from the cover pool?
(9) Comments: See comment IV.3.
5. Is there any additional LTV limit on a portfolio basis?
  • No
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?
  • “Natural” matching (matching without the use of off-balance sheet instruments) and stress testing
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:
4. What type of coverage test is applied?
  • Nominal cover
5. What is the frequency of coverage calculations?
  • Other
(10) Comments: The Covered bond law doesn't contain a specific rule for this. Only a pure "coverage priciple" is enacted.
6. What types of stress scenarios are applied?
  • Static
7. What is the frequency of stress test calculations?
  • Other
(11) Comments: No specific rule on this.
. 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?
  • “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.)
  • Contractual arrangements, e.g. a requirement to establish a reserve fund
(12) Comments: An excess cover up to 20% is possible.
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
  • Contractual arrangements, e.g. maturity extension or prematurity test
(13) Comments: An excess cover up to 20% is possible.
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?
  • Event of default of the issuer
. Monitoring of exposures to market and liquidity risk
13. Who monitors the maintenance of coverage tests?
  • Trustee/cover pool monitor
14. Are there any regular public reporting requirements for market and liquidity risk?
  • Yes
. Overcollateralisation
15. Is mandatory minimum overcollateralisation required?
  • By published voluntary commitments
(14) Comments: An excess cover of up to 20% may be stipulated in the issuance program.
16. What is the level of minimum mandatory overcollateralisation?
17. If mandatory overcollateralisation is required, are the amounts above the minimum OC level protected?
(15) Comments: The OC is possible only up to 20%. Beyond 20% it is not protected.
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?
  • Event of default of the issuer
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
4. Is there a special role of banking supervision in crisis regarding covered bonds?
  • No specific role
(16) Comments: The cover pool in insolvnecy of the issuing credit institution has to be administrated by the overall bankruptcy receiver.
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
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
  • Specific cover pool administration
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?
  • No
6. If derivatives are permitted in the cover pool, what is their ranking?
VIII. RISK WEIGHTING & COMPLIANCE WITH EUROPEAN LEGISLATION
1. Does the covered bond fulfil the criteria of UCITS 52(4)?
  • Yes
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?
  • No
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
  • List
3. Fact Book Country Chapter
  • Chapter
 
4. Hypostat Country Chapter
  • Chapter

Comments for your selection

  • 1: Issues by SPVs possible, but will not be looked after here.
  • 2: Overall there are significant changes in the covered bond legislation under discussion.
  • 3: A specific was to be enacted, but wasn't. New legislation under discussion.
  • 4: Additional cover by state bonds or cash is possible.
  • 5: No public secotr assets.
  • 6: Buildings under construction not more than 10% of the cover pool.
  • 7: Regularly cover asstes do not exceed the eligible LTV. Majority opinion as of today is, that loans exceeding this LTV at all cannot be part of the cover.
  • 8: See comment to IV.3.
  • 9: See comment IV.3.
  • 10: The Covered bond law doesn't contain a specific rule for this. Only a pure "coverage priciple" is enacted.
  • 11: No specific rule on this.
  • 12: An excess cover up to 20% is possible.
  • 13: An excess cover up to 20% is possible.
  • 14: An excess cover of up to 20% may be stipulated in the issuance program.
  • 15: The OC is possible only up to 20%. Beyond 20% it is not protected.
  • 16: The cover pool in insolvnecy of the issuing credit institution has to be administrated by the overall bankruptcy receiver.