Draft Belgian CB Framework
Belgium Issuers - Legislation
| 1 | Who is the issuer? |
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| Comments: Issuers need to be authorised by the National Bank of Belgium (the Regulator) |
| 2 | Does the bondholder have recourse to the credit institution? |
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| 3 | Who owns the cover assets? |
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| 4 | Is the issuer the originator of the assets? |
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| Comments: It is also possible that the universal credit institution/issuer purchases the assets from another entity in its normal course of business. |
| 1 | Are the bonds governed by a special covered bond Legislation? |
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| 2 | What is the legal framework for bankruptcy of the issuer of covered bonds? |
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| Comments: When a credit institution issues Belgian pandbrieven, its assets will by operation of law consist of two distinct estates: its general estate on the one hand and a separate, ringfenced “segregated estate” on the other hand. The general estate will comprise those assets of the issuing bank to which all its creditors have a direct recourse. The segregated estate will not be part of the general insolvency estate. |
| 1 | What types of assets may be included in cover pools? |
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| Comments: (i) Group originated public sector ABS is also allowed; (ii) 'Mortgage loans' can include loans that are partially (upto 40%) secured by Belgian mortgage mandates. |
| 2 | What is the geographical scope for public sector assets? |
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| 3 | What is the geographical scope for mortgage assets? |
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| 4 | Are regular covered bond specific disclosure requirements to the public mandatory? |
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| Comments: The Pool Monitor is required to provide regular covered bond information to the Regulator. |
| 1 | LTV is calculated using which valuation?[4] |
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| Comments: (i) Sale value, as disclosed in the notarial deed; (ii) the offer of a building company in case of a newbuilt house. |
| 2 | Are there any special LTV limits used solely for calculating collateralisation rates for the cover pool (if yes, specify)? |
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| 3 | Do bondholders get the benefit of that portion of the loan which exceeds the LTV cap? |
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| 4a | Is there an LTV cap which makes the entire loan ineligible to be put in the cover pool (if yes, specify)? |
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| 4b | Is there an LTV cap which would require a loan to be removed from the cover pool? |
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| 5 | Is there any additional LTV limit on a portfolio basis? |
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| Exposure to market risk |
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| 1 | Is exposure to market risk (e.g. interest rate, currency risks) required to be mitigated by law or contract? |
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| 2 | What is the primary method for the mitigation of market risk? |
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| Comments: Both methodologies are allowed; no primary method put forward by the law. |
| 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: |
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| 4 | What type of coverage test is applied? |
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| 5 | What is the frequency of coverage calculations? |
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| Comments: This is the minimum frequency. |
| 6 | What types of stress scenarios are applied? |
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| Comments: Stress tests not been detailed yet. |
| 7 | What is the frequency of stress test calculations? |
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| Comments: Stress tests not been detailed yet. |
| Exposure to liquidity risk |
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| 8 | Is exposure to liquidity risk required to be mitigated by law or contract? |
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| Comments: The law contains a liquidity test which requires the Issuer to have all liquidity shortages which may occur in the next 180-day period, covered by liquid assets. |
| 9 | What is the primary method for the mitigation of liquidity risk on interest payments? |
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| Comments: Next to natural matching and liquidity facilities, 'liquid assets' (as determined by the Regulator) can be added. |
| 10 | What is the primary method for the mitigation of liquidity risk on principal payments? |
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| Comments: Next to natural matching and liquidity facilities, 'liquid assets' (as determined by the Regulator) can be added. |
| 11 | Is there any grace period in case of a breach of liquidity risk mitigants? |
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| 12 | What is the consequence of not fixing a breach of liquidity risk mitigants? |
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| Monitoring of exposures to market and liquidity risk |
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| 13 | Who monitors the maintenance of coverage tests? |
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| 14 | Are there any regular public reporting requirements for market and liquidity risk? |
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| Comments: The Pool Monitor is required to provide regular covered bond information (including coverage and liquidity tests) to the Regulator. |
| Overcollateralisation |
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| 15 | Is mandatory minimum overcollateralisation required? |
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| 16 | What is the level of minimum mandatory overcollateralisation? |
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| 17 | If mandatory overcollateralisation is required, are the amounts above the minimum OC level protected? |
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| Comments: In case of an insolvency, the receiver can claim that part of the overcollateral that is, with certainty, not required as cover asset. |
| 18 | Is there any grace period in case of a breach of the coverage test? |
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| Comments: The Regulator determines the grace period on a case by case basis; could be zero in extreme cases. |
| 19 | What is the consequence of not fixing a breach of the coverage test? |
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| Comments: The license required to issue covered bonds will be revoked, either per program or per issuer, as determined by the Regulator. |
| 1 | Is a special license required for the issuing of covered bonds? |
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| 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? |
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| Comments: The issuer reports at least monthly to the Pool Monitor, who reports at least quarterly to the Regulator. |
| 3 | What is the role of the banking supervision regarding covered bonds? |
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| 4 | Is there a special role of banking supervision in crisis regarding covered bonds? |
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| 5 | Is there a cover pool monitor independent from the issuer? |
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| 6 | If there is an independent cover pool monitor, what are its duties? |
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| 1 | Do covered bonds automatically accelerate when the credit institution goes insolvent? |
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| 2 | What is the cover pool? |
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| 3 | How are the covered bondholders protected against claims from other creditors in case of insolvency of the issuer? |
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| 4 | Is there recourse to the credit institution’s insolvency estate upon a cover pool default? |
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| 5 | Are there provisions that require derivatives to continue in case of insolvency of the credit institution? |
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| 6 | If derivatives are permitted in the cover pool, what is their ranking? |
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| 1 | Does the covered bond fulfil the criteria of UCITS 22(4)? |
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| 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)? |
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| Comments: Yes if determined CRD compliant by the Regulator. If so, t will be mentioned on a special list and it can use the special name "Belgische pandbrieven / Letrres de gage belge". |
| 3 | Are listed covered bonds eligible in repo transactions with the national central bank? |
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| Comments: Issuers are allowed to retain own issued covered bonds. |
| 4 | Are there any special investment regulations regarding covered bonds? |
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| 1 | Link to National Association representing covered bond interests |
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| 2 | Link to national regulators and supervisors |
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| 3 | Fact Book Country Chapter |
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| 4 | Hypostat Country Chapter |
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