5. Covered bonds which are not subject to a credit rating by a designated ECAI shall be assigned a risk weighting based on the risk weighting assigned to the senior unsecured exposures to the issuing institution. With more than €2.9 trillion outstanding at the end of 2020, covered bonds play an important role in European capital markets and contribute to the efficient allocation of capital and ultimately to economic development and recovery. (e) the clearing set does not contain OTC derivative contracts that have nothing to do with the cover pool of covered bonds; 1. In order to qualify for preferential treatment in accordance with paragraphs 4 and 5 of this Article, covered bonds within the meaning of point (1) of Article 3 of Directive (EU) 2019/2162 of the European Parliament and of the Council comply with the requirements of paragraphs 3, 3a and 3b of this Article and shall be guaranteed by one of the following eligible assets: Eligible assets – The Government proposes that the legal framework only allow loans issued on the guarantee of a residential property located in Canada to be included in the coverage pool, unlike other jurisdictions where a wide range of assets can provide collateral for covered bonds. To date, all Canadian covered bond programs include only Canadian residential mortgages in their collateral reserve. 4. Covered bonds for which a credit assessment has been carried out by a designated ECAI shall be assigned a risk weighting in accordance with Table 6a corresponding to the credit rating of the European reporting organisation in accordance with Article 136. 2.
The situations referred to in points (a) to (f) of paragraph 1 shall include guarantees limited exclusively by law to the protection of bondholders against loss. The stock of covered bonds in the EU reached €2.5 trillion in 2014, making European credit institutions a world leader in these markets. Covered bond markets in the EU remain largely fragmented from a national perspective and performance varies considerably from one Member State to another. This fragmentation limits the standardization of underwriting and disclosure practices and creates barriers to deep, liquid and accessible markets, particularly across borders. 1c. For the purposes of point (d) of the first subparagraph of paragraph 1, the 80 % limit shall apply to each individual loan, determine the part of the loan that contributes to covering the commitments associated with the secured obligation and shall apply throughout the duration of the loan. (a) the variation margin is not recorded by the issuer of the covered bond or cover pool, but is recovered in cash by its counterparty and returned to its counterparty at maturity; 3. Immovable property and vessels guaranteeing guaranteed bonds in accordance with this Regulation shall comply with the requirements set out in Article 208. The check on the value of immovable property referred to in point (a) of Article 208(3) shall be carried out regularly and at least once a year for all immovable property and vessels. As a result, many European countries have introduced new legislation on covered bonds or updated existing rules to be part of this evolution and respond to the significant growth in mortgage lending activities in the European Union. Iii. Public supervision of covered bonds (Articles 18 to 26) The RTS on risk mitigation techniques developed under the European Market Infrastructure Regulation for OTC derivative contracts not cleared by a CCP provides for special treatment of hedging pool derivatives (derivatives adopted by covered bond issuers to cover the market risks of the hedging pool and falling within the scope of the coverage pool).
Coverage Obligation Plan). The RTS sets out a number of specific conditions under which such cover pool derivatives concluded in relation to covered bonds in accordance with Article 129 of the CRR are exempted from margin requirements for bilateral clearing (i.e. clearing that is not executed through a CCP). The 8. In December 2021, a new law on the issue of covered bonds (the „Covered Bond Act“) was adopted, which implements Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on the issue of covered bonds and on the public supervision of covered bonds (the „Covered Bond Directive“) and amends the existing legal framework. The Covered Bond Act will enter into force on 8 July 2022. The Commission has launched a consultation to assess the desirability of a possible future integrated European framework for covered bonds. (a) the OTC derivative contract is not terminated in the event of settlement or insolvency of the covered bond issuer or cover group; Covered bond rules at EU level focus on the treatment of the short-term liquidity requirement (LCR), which was established by the European Commission through a delegated act under the Capital Requirements Regulation.
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