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Questions Slovakian Covered Bonds
I. STRUCTURE OF THE ISSUER
1. Who is the issuer?
  • Universal credit institution with a special license
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
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?
  • General insolvency law
  • Specific legal framework superseding the general insolvency law
(1) Comments: There is a combination of legal framework for bankruptcy of the issuer of covered bonds – Act on banks, amendments (i.e. § 72 (4)) and Act on bankruptcy (i. e. § 8, § 28 (2), § 69, § 176 – 196), amendments.
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.)
2. What is the geographical scope for public sector assets?
  • Domestic
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]
  • Mortgage lending value
2. Are there any special LTV limits used solely for calculating collateralisation rates for the cover pool (if yes, specify)?
  • Residential      
    70 %
3. Do bondholders get the benefit of that portion of the loan which exceeds the LTV cap?
  • No
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)
    10 %
(2) Comments: Mortgage and municipal loans going beyond the 70 % limit may only be granted on condition that the total amount of claims amount of a mortgage bank overrunning the limit does not exceed 10 percent of the total amount of outstanding mortgage and municipal loans.
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:
  • Not relevant
4. What type of coverage test is applied?
  • Nominal cover
5. What is the frequency of coverage calculations?
  • Daily
6. What types of stress scenarios are applied?
  • Static
  • Dynamic
  • Model based (i.e. VaR)
(3) Comments: These types of stress scenarios are applied on all banking activities, not separately for coverage calculation.
7. What is the frequency of stress test calculations?
  • Monthly
  • Quarterly
(4) Comments: It depends on the risk types. Stress test coverage calculations are not applied separately.
. 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.)
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
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?
  • Other regulatory or rule-based action
. Monitoring of exposures to market and liquidity risk
13. Who monitors the maintenance of coverage tests?
  • Supervisory authority
  • Trustee/cover pool monitor
  • Other
(5) Comments: Trustee monitors register of MLs via natural matching, he/she supervises data on ordinary and substitute coverage, i. e.
14. Are there any regular public reporting requirements for market and liquidity risk?
  • Yes
. Overcollateralisation
15. Is mandatory minimum overcollateralisation required?
(6) Comments: It is not required by legislation/regulation, contractual obligation, or by published voluntary commitments. In practise we try to keep coverage of the pools on reguired level (100 %), over it 1 - 2%.
16. What is the level of minimum mandatory overcollateralisation?

  • 1 - 2 %
(7) Comments: not published voluntary commitments
17. If mandatory overcollateralisation is required, are the amounts above the minimum OC level protected?
  • Yes
(8) Comments: Although minimum mandatory overcollateralisation is not required, the amounts are 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?
  • Other regulatory or rule-based actions
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
(9) Comments: Monitoring of exposure to market risk and liquidity risk, evaluation of operational risk are realised within whole universal banking activities framework.
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?
  • 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
  • Other, please specify:      
    verification of limits and balance principles
(10) Comments: Mortgage Trustee duties are regulated in detail in the Decree of National Bank of Slovakia and Ministry of Finance of Slovak Republic No. 661/2004 Coll., Mortgage register, details on Mortgage Trustee position and his/her activities.
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?
  • No
6. If derivatives are permitted in the cover pool, what is their ranking?
(11) Comments: Derivatives are not permitted in the cover pool.
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?
  • Yes
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: There is a combination of legal framework for bankruptcy of the issuer of covered bonds – Act on banks, amendments (i.e. § 72 (4)) and Act on bankruptcy (i. e. § 8, § 28 (2), § 69, § 176 – 196), amendments.
  • 2: Mortgage and municipal loans going beyond the 70 % limit may only be granted on condition that the total amount of claims amount of a mortgage bank overrunning the limit does not exceed 10 percent of the total amount of outstanding mortgage and municipal loans.
  • 3: These types of stress scenarios are applied on all banking activities, not separately for coverage calculation.
  • 4: It depends on the risk types. Stress test coverage calculations are not applied separately.
  • 5: Trustee monitors register of MLs via natural matching, he/she supervises data on ordinary and substitute coverage, i. e.
  • 6: It is not required by legislation/regulation, contractual obligation, or by published voluntary commitments. In practise we try to keep coverage of the pools on reguired level (100 %), over it 1 - 2%.
  • 7: not published voluntary commitments
  • 8: Although minimum mandatory overcollateralisation is not required, the amounts are protected.
  • 9: Monitoring of exposure to market risk and liquidity risk, evaluation of operational risk are realised within whole universal banking activities framework.
  • 10: Mortgage Trustee duties are regulated in detail in the Decree of National Bank of Slovakia and Ministry of Finance of Slovak Republic No. 661/2004 Coll., Mortgage register, details on Mortgage Trustee position and his/her activities.
  • 11: Derivatives are not permitted in the cover pool.