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Questions Cédulas Hipotecarias - CH
I. STRUCTURE OF THE ISSUER
1. Who is the issuer?
  • Universal credit institution
  • 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
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: The specific legal framework defined in the Law 2/81 that regulates the mortgage market complements the general insolvency law.
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.)
(2) Comments: According to the national law, the cédulas hipotecarias can be backed up to a limit of 5 percent of the issued capital by the substitution assets that, among the differ options described above, may include: Exposures to public sector entities, Exposures to credit institutions, Group originated Senior MBS and Senior MBS issued by third parties.
2. What is the geographical scope for public sector assets?
  • EEA
(3) Comments: In the case of cédulas hipotecarias the scope is the EU
3. What is the geographical scope for mortgage assets?
  • EEA
(4) Comments: In the case of cédulas hipotecarias the scope is the EU
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      
  • Commercial      
(5) Comments: LTV limits in the Spanish legislation do not apply to the cover pool (which is comprised by the entire issuer’s mortgage portfolio) but to issuance limits.

Credit institutions shall not issue Cédulas Hipotecarias for an amount greater than 80 per 100 of the outstanding eligible mortgage loans and credits in their portfolios, which have to fulfil the following LTV requirements: 60 per 100 LTV in the general case and 80 per 100 for residential loans.
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
(6) Comments: See Comment on IV.2. However, the LTV caps for eligible loans affect the entire loan, i.e. no part of a loan above the LTV cap is eligible.
4b. Is there an LTV cap which would require a loan to be removed from the cover pool?
  • No
(7) Comments: See Comment on IV.2 and IV.4a
5. Is there any additional LTV limit on a portfolio basis?
  • No
(8) Comments: See Comment on IV.2
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?
  • No
(9) Comments: The majority of mortgage loans in Spain are floating and Issuers issue mainly fixed rate bonds. As a result of that Spanish issuers hedge theses issues. This is a common practice.
2. What is the primary method for the mitigation of market risk?
  • Use of derivative hedge instruments
(10) Comments: When the issuance is at a variable rate, then the method used will be “natural matching”
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?
  • Not relevant
5. What is the frequency of coverage calculations?
  • Daily
6. What types of stress scenarios are applied?
  • Not relevant
7. What is the frequency of stress test calculations?
  • Not relevant
. Exposure to liquidity risk
8. Is exposure to liquidity risk required to be mitigated by law or contract?
  • Yes
(11) Comments: The mitigation to the exposure to liquidity risk comes from the high level of over-collateralization that is required (by law) and also by the substitution assets serving as collateral of the issue.
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.)
(12) Comments: See question V.8
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
(13) Comments: See question V.8
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?
(14) Comments: Not applicable
. 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?
  • Yes
. Overcollateralisation
15. Is mandatory minimum overcollateralisation required?
  • By legislation/regulation
16. What is the level of minimum mandatory overcollateralisation?

  • 25%
(15) Comments: The minimum level is 25%.
This level would take place if the following two conditions are fulfilled:
• The entire mortgage portfolio of the issuer is eligible (see LTV limits in item IV.2).
• The Issuance level amounts to 80% of mortgage portfolio.
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?
  • Length of period:
    10 days
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, but no additional requirements
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
  • Reporting on demand for special occasions
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?
  • No specific role
5. Is there a cover pool monitor independent from the issuer?
  • No
(16) Comments: No, but it is foreseen to be included in the future regulations.
6. If there is an independent cover pool monitor, what are its duties?
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?
  • Subordinated to covered bond holders
(17) Comments: Covered bonds holder have preference over the issuer’s insolvency state.
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?
  • Yes
4. Are there any special investment regulations regarding covered bonds?
  • Yes
IX. ADDITIONAL INFORMATION
1. Link to National Association representing covered bond interests
2. Link to national regulators and supervisors
3. Fact Book Country Chapter
  • Chapter
 
4. Hypostat Country Chapter
  • Chapter
 

Comments for your selection

  • 1: The specific legal framework defined in the Law 2/81 that regulates the mortgage market complements the general insolvency law.
  • 2: According to the national law, the cédulas hipotecarias can be backed up to a limit of 5 percent of the issued capital by the substitution assets that, among the differ options described above, may include: Exposures to public sector entities, Exposures to credit institutions, Group originated Senior MBS and Senior MBS issued by third parties.
  • 3: In the case of cédulas hipotecarias the scope is the EU
  • 4: In the case of cédulas hipotecarias the scope is the EU
  • 5: LTV limits in the Spanish legislation do not apply to the cover pool (which is comprised by the entire issuer’s mortgage portfolio) but to issuance limits. Credit institutions shall not issue Cédulas Hipotecarias for an amount greater than 80 per 100 of the outstanding eligible mortgage loans and credits in their portfolios, which have to fulfil the following LTV requirements: 60 per 100 LTV in the general case and 80 per 100 for residential loans.
  • 6: See Comment on IV.2. However, the LTV caps for eligible loans affect the entire loan, i.e. no part of a loan above the LTV cap is eligible.
  • 7: See Comment on IV.2 and IV.4a
  • 8: See Comment on IV.2
  • 9: The majority of mortgage loans in Spain are floating and Issuers issue mainly fixed rate bonds. As a result of that Spanish issuers hedge theses issues. This is a common practice.
  • 10: When the issuance is at a variable rate, then the method used will be “natural matching”
  • 11: The mitigation to the exposure to liquidity risk comes from the high level of over-collateralization that is required (by law) and also by the substitution assets serving as collateral of the issue.
  • 12: See question V.8
  • 13: See question V.8
  • 14: Not applicable
  • 15: The minimum level is 25%. This level would take place if the following two conditions are fulfilled: • The entire mortgage portfolio of the issuer is eligible (see LTV limits in item IV.2). • The Issuance level amounts to 80% of mortgage portfolio.
  • 16: No, but it is foreseen to be included in the future regulations.
  • 17: Covered bonds holder have preference over the issuer’s insolvency state.