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Frameworks from Luxembourg

Questions	Lettres de Gage hypothécaires	Lettres de Gage mobilières	Lettres de Gage publiques
I. STRUCTURE OF THE ISSUER
1. Who is the issuer?	Specialized credit institution	Specialized credit institution	Specialized credit institution
2. Does the bondholder have recourse to the credit institution?	Yes, direct	Yes, direct	Yes, direct
3. Who owns the cover assets?	The issuer directly	The issuer directly	The issuer directly
4. Is the issuer the originator of the assets?	Yes	Yes	Yes
	(1) Comments: Assets purchased in the secondary market are also eligible.	(2) Comments: Assets purchased in the secondary market are also eligible.	(3) Comments: Assets purchased in the secondary market are also eligible.
II. FRAMEWORK
1. Are the bonds governed by a special covered bond Legislation?	Yes	Yes	Yes
2. What is the legal framework for bankruptcy of the issuer of covered bonds?	Specific legal framework superseding the general insolvency law	Specific legal framework superseding the general insolvency law	Specific legal framework superseding 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.) Group originated Senior MBS Senior MBS issued by third parties Exposures to credit institutions	Ship loans Aircraft loans Other moveable asset loans Exposures to credit institutions	Exposures to public sector entities Exposures to credit institutions Exposure to PPI or PFI where public sector cash flows are conditional
	(4) Comments: Exposures to credit institutions are only eligible as substitute assets which are limited to 20% of the nominal amount of the "Lettres de gage hypothécaires" in circulation. The underlying assets of the Senior MBS tranches have to fulfil the requirements of the law.	(5) Comments: Exposures to credit institutions are also eligible as substitute assets which are limited to 20% of the nominal value of the "Lettres de Gage mobilières" in circulation.	(6) Comments: No limits for exposures to public sector owned credit institutions, exposures to privately owned credit institutions are only eligible as substitute assets which are limited to 20% of the nominal value of the "Lettres de Gage publiques" in circulation.
2. What is the geographical scope for public sector assets?			Domestic Multilateral development banks EEA CH USA, Canada, Japan OECD NZ AUS
	(7) Comments: n.a.	(8) Comments: n.a.	(9) Comments: Multilateral development banks as long as the majority of the shares is owned by EU/EEA/OECD countries.
3. What is the geographical scope for mortgage assets?	Domestic EEA CH USA, Canada, Japan OECD NZ AUS	Domestic EEA CH USA, Canada, Japan OECD NZ AUS
		(10) Comments: The assets must be registered in one of the above-mentioned states.	(11) Comments: n.a.
4. Are regular covered bond specific disclosure requirements to the public mandatory?	No	No	No
	(12) Comments: Voluntary disclosures on a regular basis.	(13) Comments: Voluntary disclosures on a regular basis.	(14) Comments: Voluntary disclosures on a regular basis.
IV. VALUATION OF THE MORTGAGE COVER POOL & LTV CRITERIA
1. LTV is calculated using which valuation?[4]	Mortgage lending value	Other
		(15) Comments: As Lettres de Gage mobilières have not yet been issued in Luxembourg, detailed regulations regarding the valuation have not yet been issued.
2. Are there any special LTV limits used solely for calculating collateralisation rates for the cover pool (if yes, specify)?	Residential 80% Commercial 60%	Ships 60% Aircraft 60% Other moveable assets 60%
3. Do bondholders get the benefit of that portion of the loan which exceeds the LTV cap?	No	No
4a. Is there an LTV cap which makes the entire loan ineligible to be put in the cover pool (if yes, specify)?	No	No
4b. Is there an LTV cap which would require a loan to be removed from the cover pool?	No	No
5. Is there any additional LTV limit on a portfolio basis?	No	No
			(16) Global comments for this chapter:n.a.
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	Yes	Yes
	(17) Comments: By law.	(18) Comments: By law.	(19) Comments: By law.
2. What is the primary method for the mitigation of market risk?	Use of derivative hedge instruments	Use of derivative hedge instruments	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:	By the time of issue of covered bonds or entry of asset in the cover pool	By the time of issue of covered bonds or entry of asset in the cover pool	By the time of issue of covered bonds or entry of asset in the cover pool
4. What type of coverage test is applied?	Nominal cover Present value cover	Nominal cover Present value cover	Nominal cover Present value cover
5. What is the frequency of coverage calculations?	Daily Monthly Quarterly	Daily Monthly Quarterly	Daily Monthly Quarterly
	(20) Comments: Daily: internal, for Special Auditor in case of issue of covered bonds. Monthly: for Supervisory Authority. Quarterly: for Rating Agencies.	(21) Comments: Daily: internal, for Special Auditor in case of issue of covered bonds. Monthly: for Supervisory Authority. Quarterly: for Rating Agencies.	(22) Comments: Daily: internal, for Special Auditor in case of issue of covered bonds. Monthly: for Supervisory Authority. Quarterly: for Rating Agencies.
6. What types of stress scenarios are applied?	Static	Static	Static
7. What is the frequency of stress test calculations?	Monthly	Monthly	Monthly
. Exposure to liquidity risk
8. Is exposure to liquidity risk required to be mitigated by law or contract?	Yes	Yes	Yes
	(23) Comments: According to the law appropriate measures have to be taken by the issuer to ensure all payments of the covered bonds in circulation.	(24) Comments: According to the law appropriate measures have to be taken by the issuer to ensure all payments of the covered bonds in circulation.	(25) Comments: According to the law appropriate measures have to be taken by the issuer to ensure all payments of the covered bonds in circulation.
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.)	“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.)	“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.)
	(26) Comments: "Natural" matching is taken to include replacing CBs with new issues, as well as substitute assets.	(27) Comments: "Natural" matching is taken to include replacing CBs with new issues, as well as substitute assets.	(28) Comments: "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	Natural matching (matching without the use of off-balance sheet instruments) and stress testing	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	No	No
12. What is the consequence of not fixing a breach of liquidity risk mitigants?	Other regulatory or rule-based action	Other regulatory or rule-based action	Other regulatory or rule-based action
. Monitoring of exposures to market and liquidity risk
13. Who monitors the maintenance of coverage tests?	Supervisory authority Rating agency Trustee/cover pool monitor Other	Supervisory authority Rating agency Trustee/cover pool monitor Other	Supervisory authority Rating agency Trustee/cover pool monitor Other
	(29) Comments: External auditor.	(30) Comments: External auditor.	(31) Comments: External auditor.
14. Are there any regular public reporting requirements for market and liquidity risk?	No	No	No
	(32) Comments: Only on a voluntary basis.	(33) Comments: Only on a voluntary basis.	(34) Comments: Only on a voluntary basis.
. Overcollateralisation
15. Is mandatory minimum overcollateralisation required?	By legislation/regulation	By legislation/regulation	By legislation/regulation
16. What is the level of minimum mandatory overcollateralisation?	2%	2%	2%
	(35) Comments: On a nominal and on a net present value basis.	(36) Comments: On a nominal and on a net present value basis.	(37) Comments: On a nominal and on a net present value basis.
17. If mandatory overcollateralisation is required, are the amounts above the minimum OC level protected?	Yes	Yes	Yes
18. Is there any grace period in case of a breach of the coverage test?	No	No	No
19. What is the consequence of not fixing a breach of the coverage test?	Other regulatory or rule-based actions	Other regulatory or rule-based actions	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	Yes with additional requirements compared to general banking supervision regulations	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 Reporting on demand for special occasions	Periodic reporting required Reporting on demand for special occasions	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 To check minimum mandatory overcollateralisation requirements	To check whether eligibility criteria are fulfilled and documented To check minimum mandatory overcollateralisation requirements	To check whether eligibility criteria are fulfilled and documented To check minimum mandatory overcollateralisation requirements
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	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	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
5. Is there a cover pool monitor independent from the issuer?	Yes	Yes	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	Performing audits of the cover pool Reporting duties to the supervision authority Verification of coverage tests	Performing audits of the cover pool Reporting duties to the supervision authority Verification of coverage tests
	(38) Global comments for this chapter:In the case of bankruptcy of the Issuer, the Supervisory Authority takes over the management of the register and the cover pool which will not form part of the bankruptcy estate.	(39) Global comments for this chapter:In the case of bankruptcy of the Issuer, the Supervisory Authority takes over the management of the register and the cover pool which will not form part of the bankruptcy estate.	(40) Global comments for this chapter:In the case of bankruptcy of the Issuer, the Supervisory Authority takes over the management of the register and the cover pool which will not form part of the bankruptcy estate.
VII. SEGREGATION OF ASSETS & BANKRUPTCY REMOTENESS OF COVERED BONDS
1. Do covered bonds automatically accelerate when the credit institution goes insolvent?	No	No	No
2. What is the cover pool?	All assets on the cover register	All assets on the cover register	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 Specific cover pool administration	Preferential claim by law Specific cover pool administration	Preferential claim by law Specific cover pool administration
4. Is there recourse to the credit institution’s insolvency estate upon a cover pool default?	Yes, pari passu with unsecured creditors	Yes, pari passu with unsecured creditors	Yes, pari passu with unsecured creditors
5. Are there provisions that require derivatives to continue in case of insolvency of the credit institution?	Yes	Yes	Yes
	(41) Comments: The derivatives in the cover pool are not affected by the insolvency proceedings.	(42) Comments: The derivatives in the cover pool are not affected by the insolvency proceedings.	(43) Comments: The derivatives in the cover pool are not affected by the insolvency proceedings.
6. If derivatives are permitted in the cover pool, what is their ranking?	Pari passu to covered bond holders	Pari passu to covered bond holders	Pari passu to covered bond holders
VIII. RISK WEIGHTING & COMPLIANCE WITH EUROPEAN LEGISLATION
1. Does the covered bond fulfil the criteria of UCITS 22(4)?	Yes	Yes	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)?	No	No	No
	(44) Comments: The criteria of the covered bond legislation are wider than those of the CRD.	(45) Comments: The criteria of the covered bond legislation are wider than those of the CRD.	(46) Comments: The criteria of the covered bond legislation are wider than those of the CRD.
3. Are listed covered bonds eligible in repo transactions with the national central bank?	Yes	Yes	Yes
4. Are there any special investment regulations regarding covered bonds?	Yes	Yes	Yes
IX. ADDITIONAL INFORMATION
1. Link to National Association representing covered bond interests	Association ABBL - Luxembourg Bankers' Association	Association ABBL - Luxembourg Bankers' Association	Association ABBL - Luxembourg Bankers' Association
2. Link to national regulators and supervisors	List Commission de Surveillance du Secteur Financier	List Commission de Surveillance du Secteur Financier	List Commission de Surveillance du Secteur Financier
3. Fact Book Country Chapter	Chapter	Chapter	Chapter
	Luxembourg	Luxembourg	Luxembourg
4. Hypostat Country Chapter	Chapter	Chapter	Chapter
	Luxembourg.pdf	Luxembourg.pdf	Luxembourg.pdf

Comments for your selection

1: Assets purchased in the secondary market are also eligible.
2: Assets purchased in the secondary market are also eligible.
3: Assets purchased in the secondary market are also eligible.
4: Exposures to credit institutions are only eligible as substitute assets which are limited to 20% of the nominal amount of the "Lettres de gage hypothécaires" in circulation. The underlying assets of the Senior MBS tranches have to fulfil the requirements of the law.
5: Exposures to credit institutions are also eligible as substitute assets which are limited to 20% of the nominal value of the "Lettres de Gage mobilières" in circulation.
6: No limits for exposures to public sector owned credit institutions, exposures to privately owned credit institutions are only eligible as substitute assets which are limited to 20% of the nominal value of the "Lettres de Gage publiques" in circulation.
7: n.a.
8: n.a.
9: Multilateral development banks as long as the majority of the shares is owned by EU/EEA/OECD countries.
10: The assets must be registered in one of the above-mentioned states.
11: n.a.
12: Voluntary disclosures on a regular basis.
13: Voluntary disclosures on a regular basis.
14: Voluntary disclosures on a regular basis.
15: As Lettres de Gage mobilières have not yet been issued in Luxembourg, detailed regulations regarding the valuation have not yet been issued.
16: n.a.
17: By law.
18: By law.
19: By law.
20: Daily: internal, for Special Auditor in case of issue of covered bonds. Monthly: for Supervisory Authority. Quarterly: for Rating Agencies.
21: Daily: internal, for Special Auditor in case of issue of covered bonds. Monthly: for Supervisory Authority. Quarterly: for Rating Agencies.
22: Daily: internal, for Special Auditor in case of issue of covered bonds. Monthly: for Supervisory Authority. Quarterly: for Rating Agencies.
23: According to the law appropriate measures have to be taken by the issuer to ensure all payments of the covered bonds in circulation.
24: According to the law appropriate measures have to be taken by the issuer to ensure all payments of the covered bonds in circulation.
25: According to the law appropriate measures have to be taken by the issuer to ensure all payments of the covered bonds in circulation.
26: "Natural" matching is taken to include replacing CBs with new issues, as well as substitute assets.
27: "Natural" matching is taken to include replacing CBs with new issues, as well as substitute assets.
28: "Natural" matching is taken to include replacing CBs with new issues, as well as substitute assets.
29: External auditor.
30: External auditor.
31: External auditor.
32: Only on a voluntary basis.
33: Only on a voluntary basis.
34: Only on a voluntary basis.
35: On a nominal and on a net present value basis.
36: On a nominal and on a net present value basis.
37: On a nominal and on a net present value basis.
38: In the case of bankruptcy of the Issuer, the Supervisory Authority takes over the management of the register and the cover pool which will not form part of the bankruptcy estate.
39: In the case of bankruptcy of the Issuer, the Supervisory Authority takes over the management of the register and the cover pool which will not form part of the bankruptcy estate.
40: In the case of bankruptcy of the Issuer, the Supervisory Authority takes over the management of the register and the cover pool which will not form part of the bankruptcy estate.
41: The derivatives in the cover pool are not affected by the insolvency proceedings.
42: The derivatives in the cover pool are not affected by the insolvency proceedings.
43: The derivatives in the cover pool are not affected by the insolvency proceedings.
44: The criteria of the covered bond legislation are wider than those of the CRD.
45: The criteria of the covered bond legislation are wider than those of the CRD.
46: The criteria of the covered bond legislation are wider than those of the CRD.