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Questions General Law Based CBs
I. STRUCTURE OF THE ISSUER
1. Who is the issuer?
  • Specialized credit institution
(1) Comments: The issuer is a duly licensed credit institution but with a limited purpose.
2. Does the bondholder have recourse to the credit institution?
  • Yes, direct
(2) Comments: Direct to the Issuer which is a credit institution by benefiting of a pledge over all its assets and indirect one towards the originator/sponsor bank
3. Who owns the cover assets?
  • Credit institution, but pledged to the issuer (with transfer to the issuer upon trigger event)
(3) Comments: Assets automatically transferred to the Issuer upon default of originator/sponsor bank as pledge of assets (financial guarantee) based on European collateral directive (L 211-36 and Seq French Financial Monetary Code) which supersedes general insolvency law
4. Is the issuer the originator of the assets?
  • No
(4) Comments: The originator is the sponsor bank. The Issuer is fully-owned by the sponsor bank and bears the name of the sponsor bank ie BNP Paribas Home Loan Covered Bonds (SA)
II. FRAMEWORK
1. Are the bonds governed by a special covered bond Legislation?
  • No
(5) Comments: However, Bondsholders benefit from a pledge governed by French Civil code over all the Issuer's assets which allow them to have a contractual privilege, instead of legal one, over them.
2. What is the legal framework for bankruptcy of the issuer of covered bonds?
  • General insolvency law
(6) Comments: To be underlined : the transposition of the Collateral directive implemented to pledge the assets supersedes the common insolvency law : the assets may be transfered even if the originator is already bankrupt.
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.)
(7) Comments: other types of assets are allowed as substitute assets
2. What is the geographical scope for public sector assets?
  • Other
(8) Comments: NA for existing programmes as all home loan programmes
3. What is the geographical scope for mortgage assets?
  • Domestic
4. Are regular covered bond specific disclosure requirements to the public mandatory?
  • Yes
(9) Comments: They are done on a quarterly and yearly basis to the market through reports accessible to investors on a dedicated website.
IV. VALUATION OF THE MORTGAGE COVER POOL & LTV CRITERIA
1. LTV is calculated using which valuation?[4]
  • Market value
(10) Comments: indexation applied (80% of increase in value 100% of decrease)
2. Are there any special LTV limits used solely for calculating collateralisation rates for the cover pool (if yes, specify)?
  • Residential      
    80%
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)?
  • Residential      
(11) Comments: all loans over 100% LTV are not eligible
4b. Is there an LTV cap which would require a loan to be removed from the cover pool?
  • Residential      
    100%
  • No
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
(12) Comments: all risk is fully hedged by swaps compliant with criteria of rating agencies for such swaps
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:
  • On a trigger event, such as a rating downgrade
4. What type of coverage test is applied?
  • Nominal cover
5. What is the frequency of coverage calculations?
  • Monthly
6. What types of stress scenarios are applied?
  • Dynamic
7. What is the frequency of stress test calculations?
  • Monthly
. 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?
  • Contractual arrangements, e.g. a requirement to establish a reserve fund
(13) Comments: interest rate risk fully mitigated via hedging contracts and collateralised loan mechanism, Various additional contractual arrangements in place like the pre-maturity test
10. What is the primary method for the mitigation of liquidity risk on principal payments?
  • Contractual arrangements, e.g. maturity extension or prematurity test
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)
  • Event of default of the issuer
(14) Comments: temporary breach means no further issue and could eventually result in event of default if not solved in following periods
. Monitoring of exposures to market and liquidity risk
13. Who monitors the maintenance of coverage tests?
  • Rating agency
  • 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 contractual obligation
16. What is the level of minimum mandatory overcollateralisation?

  • 92.5% asset percentage
(15) Comments: means just over 8% minimum overcollateralisation
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:
    3 months
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
  • 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, 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
(16) Comments: the issuer is specifically licensed by the French banking authorities and frequent reporting is provided.
3. What is the role of the banking supervision regarding covered bonds?
  • No special role
(17) Comments: As for all credit institution, the banking authorities supervise regularly the issuer on, at least, a quaterly basis, perform missions to audit the Issuer and may ask for specific requests at any time.
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
(18) Comments: As for all credit institution, the banking authorities may implement all actions they may consider as necessary to safe the rights of the credit institution creditors.
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
(19) Comments: The monitor has contractually the same role as the specific controler in an "société de crédit foncier" issuing legal covered bonds.
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 pledged
(20) Comments: However, Bondsholders benefit from a pledge governed by French Civil code over all the Issuer's assets which allow them to have a contractual privilege, instead of legal one, over them.
3. How are the covered bondholders protected against claims from other creditors in case of insolvency of the issuer?
  • Sale of cover assets to an SPE
  • Specific cover pool administration
4. Is there recourse to the credit institution’s insolvency estate upon a cover pool default?
  • Yes, senior to unsecured creditors
(21) Comments: The bondsholders are senior to all creditors of issuer. In case of bankruptcy of the originator, the Issuer exercice the financial guarantee over the pledged assets. If there is on outsdanding amount, the issuer has an unsecured right towards the originator/borrower, pari passu with others
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?
  • Senior to covered bond holders
VIII. RISK WEIGHTING & COMPLIANCE WITH EUROPEAN LEGISLATION
1. Does the covered bond fulfil the criteria of UCITS 52(4)?
  • No
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
3. Fact Book Country Chapter
  • Chapter
 
4. Hypostat Country Chapter
  • Chapter
 

Comments for your selection

  • 1: The issuer is a duly licensed credit institution but with a limited purpose.
  • 2: Direct to the Issuer which is a credit institution by benefiting of a pledge over all its assets and indirect one towards the originator/sponsor bank
  • 3: Assets automatically transferred to the Issuer upon default of originator/sponsor bank as pledge of assets (financial guarantee) based on European collateral directive (L 211-36 and Seq French Financial Monetary Code) which supersedes general insolvency law
  • 4: The originator is the sponsor bank. The Issuer is fully-owned by the sponsor bank and bears the name of the sponsor bank ie BNP Paribas Home Loan Covered Bonds (SA)
  • 5: However, Bondsholders benefit from a pledge governed by French Civil code over all the Issuer's assets which allow them to have a contractual privilege, instead of legal one, over them.
  • 6: To be underlined : the transposition of the Collateral directive implemented to pledge the assets supersedes the common insolvency law : the assets may be transfered even if the originator is already bankrupt.
  • 7: other types of assets are allowed as substitute assets
  • 8: NA for existing programmes as all home loan programmes
  • 9: They are done on a quarterly and yearly basis to the market through reports accessible to investors on a dedicated website.
  • 10: indexation applied (80% of increase in value 100% of decrease)
  • 11: all loans over 100% LTV are not eligible
  • 12: all risk is fully hedged by swaps compliant with criteria of rating agencies for such swaps
  • 13: interest rate risk fully mitigated via hedging contracts and collateralised loan mechanism, Various additional contractual arrangements in place like the pre-maturity test
  • 14: temporary breach means no further issue and could eventually result in event of default if not solved in following periods
  • 15: means just over 8% minimum overcollateralisation
  • 16: the issuer is specifically licensed by the French banking authorities and frequent reporting is provided.
  • 17: As for all credit institution, the banking authorities supervise regularly the issuer on, at least, a quaterly basis, perform missions to audit the Issuer and may ask for specific requests at any time.
  • 18: As for all credit institution, the banking authorities may implement all actions they may consider as necessary to safe the rights of the credit institution creditors.
  • 19: The monitor has contractually the same role as the specific controler in an "société de crédit foncier" issuing legal covered bonds.
  • 20: However, Bondsholders benefit from a pledge governed by French Civil code over all the Issuer's assets which allow them to have a contractual privilege, instead of legal one, over them.
  • 21: The bondsholders are senior to all creditors of issuer. In case of bankruptcy of the originator, the Issuer exercice the financial guarantee over the pledged assets. If there is on outsdanding amount, the issuer has an unsecured right towards the originator/borrower, pari passu with others