Frameworks from Switzerland

Comments for your selection

• 1: Swiss Pfandbrief law (PfG) Art.2: Only two Pfandbrief institutes (Pfandbriefbank schweizerischer Hypothekarinstitute AG, Pfandbriefzentrale der schweizerischen Kantonalbanken AG) PfG Art. 5: Special banks with limited business scope (1. issuance of Swiss Pfandbriefe, 2. to grant loans to member banks, 3. invest the capital)
• 2: Issued via UBS London branch, guaranteed by UBS Hypotheken AG
• 3: The bondholder has recourse to the Pfandbrief institute (PfG Art. 27 - 31). The bondholder does not have a direct recourse to the member banks. The Pfandbrief institutes, however, have a direct recourse to the member banks.
• 4: The SPE is consolidated with the issuer for accounting purposes, the transfer exists only to ensure legal asset segregation.
• 5: Cover assets are owned by the member banks and pledged to Pfandbrief institutes.
• 6: Guaranteed by UBS Hypotheken AG
• 7: The Pfandbrief institutes are the originators of the Swiss Pfandbriefe and the member banks are the originators of the mortgage loans.
• 8: The legal basis of Swiss Pfandbriefe is the Pfandbrief law (PfG) established in 1931.
• 9: Specific legal framework under PfG and Swiss Federal Banking Law on Banks and Saving Banks (Swiss Banking law) superseding the general insolvency law. PfG Art. 14 - 26 and Swiss Banking law Art. 25 - 37.
• 10: General Insolvency Law (and Banking ordance)
• 11: Up to 15% of cover pool can be substitute assets.
• 12: Only first class mortgages on properties in Switzerland are eligible (PfG Art. 19 and 34 - 36). 95 % are residential, private single-family homes or apartment blocks and only 5 % commercial properties.
• 13: Mortgage loans to private individuals. Substitute assets may also include exposures to publc sector entities).
• 14: n.a.
• 15: Not applicable. There are no public sector cover assets.
• 16: not applicable. (Can only be used as substitute assets).
• 17: Switzerland only.
• 18: Although, in the absence of a law there is no mandatory reporting requirement both of the issuers to date have committed to provide detailed and regular disclosure.
• 19: PfG, Swiss Code of Obligations, Securities Exchange law, Swiss Banking law.
• 20: PfG Art. 34 - 36: The maximum LTV is 2/3 of market value. Detailed valuation regulation have to be authorised by the Federal finance department. Mortgage lending value fixed by Pfandbrief institute completely independent of the member bank. The decision to accept a cover assets lies with Pfandbrief institute and not with member bank.
• 21: Market value based on latest valuation.
• 22: Credit Suisse allows mortgages with a higher LTV in the pool but only gives credit for the first 70%.
• 23: PfG Art 34 - 36: Max. 66.67 % or lower.
• 24: 100%
• 25: Eligibility criteria and LTVs have to be met continuously.
• 26: Residential - 80%
• 27: As above.
• 28: Eligibility criteria and LTVs have to be met continuously.
• 29: E.g. at least 80 % of cover value after haircuts have to be residential mortgage loans.
• 30: By law there is no interest rate risk, no currency rate risk and no maturity mismatch.
• 31: By law matching between loans to member banks and Swiss Pfandbriefe, as both are denominated in CHF and have the same terms. Derivatives are not used, as there are no currency rate risk, no interest rate risk and no maturity mismatch.
• 32: Hedges are entered into at incepation although cashflows, other than under a CSA are contingent on a trigger event.
• 33: Derivatives are not used, as there are no currency rate risk, no interest rate risk and no maturity mismatch.
• 34: Not relevant, due to low LTV. Outstanding historical track. No loss since establishment of PfG (1931).
• 35: The program does not require the application of stress scenarios. However, such scenarios are taken into account by the rating agencies when calculating the required asset percentage which feeds indirectly into the coverage tests we perform.
• 36: Not relevant, due to low LTV. Outstanding historical track. No loss since establishment of PfG (1931).
• 37: By law.
• 38: Risk management and limits include: 1) Law requires cash flow matching between loans to member banks and Swiss Pfandbriefe 2) Substantial free assets in liquid form (repo capable: SNB GC bond basket holdings can be repoed against CHF to EUREX counterparties) 3) Several cash flow concentration limits per member bank, monitored daily 4) Maturity extension for defined contracts (private placements of Swiss Pfandbriefe of "Limmat" program).
• 39: Risk management and limits include: 1) Law requires cash flow matching between loans to member banks and Swiss Pfandbriefe 2) Substantial free assets in liquid form (repo capable: SNB GC bond basket holdings can be repoed against CHF to EUREX counterparties) 3) Several cash flow concentration limits per member bank, monitored daily 4) Maturity extension for defined contracts (private placements of Swiss Pfandbriefe of "Limmat" program).
• 40: A breach of the pre-maturity test gives the Guarantor the right to take action immediately.
• 41: A breach of liquidity risk mitigants is not allowed as the liquidity buffer is stipulated by law.
• 42: The Swiss Pfandbrief system is twofold. The two Swiss Pfandbrief institutes are the outsourced cover pool of their member banks. The Pfandbrief institutes value the coverage (only mortgages) completely independent of the member banks and supervise them daily.
• 43: By issuer commitment rather than by statute.
• 44: Reports to member banks, rating agency, auditors, shareholders, Federal Finance Department, Swiss exchange authorities, corporate website.
• 45: Yes, by Swiss Pfandbrief law and Swiss Financial Market Authority (FINMA) regulations.
• 46: Via the asset percentage term in the ACT.
• 47: Overcollateralisation of at least 8 % is measured after valuation of mortgage loan and individual LTV of max. 66.7 %.
• 48: De facto 1 month. A breach will occur if the ACT is not met on two consecuritve test dates.
• 49: Inter alia cashflows are redirected after a breach occurs. If this breach is not rsolved by the next Test Date (one month later) an Issuer EOD occurs.
• 50: Law based action by the Swiss Financial Market Supervisory Authority (FINMA). A breach of liquidity risk mitigants is not allowed as the liquidity buffer is stipulated by law.
• 51: Yes, as per Pfandbrief law only the two Swiss Pfandbrief institutes are legally permitted to issue Swiss Pfandbriefe.
• 52: Yes, according to Swiss Pfandbrief law.
• 53: Supervision of the Swiss Pfandbrief institutes, the issuance of Swiss Pfandbriefe and the member banks.
• 54: Yes, based on Swiss Pfandbrief law and Swiss Banking law.
• 55: The Pfandbrief institutes select and valuate the cover pool fully independent of the member bank (who grants the mortgage to the house owner) and supervises the cover pool daily.
• 56: See answer above (VI.5)
• 57: If a member bank goes insolvent (as opposed to a Swiss Pfandbrief institute), the Swiss Pfandbriefe will be satisfied according to the conditions of the issue and they will be repaid at the time of their contractual maturity. Automatic acceleration only occurs in a case of bankruptcy of the Pfandbrief institute.
• 58: The cover pool consists only of eligible mortgage loans as per cover pool register.
• 59: (All assets transferred for security purpose).
• 60: There are no significant other creditors than Pfandbrief bondholders due to special bank principle.
• 61: UBS Hypotheken AG fulfills duties under Covered Bonds (Bankruptcy remoteness of guarantor including non-petition and limited recourse).
• 62: n.a. (no derivative instrument)
• 63: n.a. (derivatives are not permitted by law)
• 64: Following Swiss regulation.
• 65: Part of SNB GC Basket (CHF)
• 66: With SNB, (also ECB as senior corporate bond).
• 67: Defined by law.