TreatiseTreatise

Covered Bonds Handbook

 by Anna T. Pinedo, James R. Tanenbaum
 
 Copyright: 2010-2014
 Last Updated: August 2014

 Product Details >> 

Product Details

  • ISBN Number: 9781402412943
  • Page Count: 1900
  • Number of Volumes: 2
  •  

With the possibility of new legislation coming that would create a statutory framework for covered bonds in the U.S., Covered Bonds Handbook arrives at an ideal time for you, as it:

  • Shows how covered bonds have been prominent financing tools in Europe for centuries.
  • Shows the many benefits of covered bonds, including potential advantages over securitization and comparative funding costs.
  • Explains how covered bond transactions are currently structured in the U.S., China, Europe, and Canada.
  • Provides a comparative analysis of the jurisdictional framework for covered bond issuances.
  • Details how foreign banks offer covered bonds into the United States
  • Discusses the proposed U.S. legislation that would codify the treatment of covered bonds.
  • Details the credit ratings methodologies of Moody’s, Fitch, and Standard & Poor’s with regard to covered bonds.
  • Examines how the FDIC’s Final Policy Statement and the Treasury Department’s Best Practices have helped to lay the groundwork for a U.S. covered bonds market.

Legislators, regulators, investors, banks, and the financial media all agree that covered bonds may be an important tool in the U.S. Be ready to take full advantage by reading the Covered Bonds Handbook.

Written by contributors from around the globe, and edited by leading authorities on sophisticated financing techniques from Morrison & Foerster LLP, Covered Bonds Handbook makes a clear and compelling case for these alternative funding instruments, showing you how covered bonds:

  • Offer issuers the opportunity to diversify their funding sources at competitive rates.
  • Give issuers additional operational flexibility.
  • Deliver the needed transparency that enables investors to assess relevant risks.
  • Feature a dual-recourse structure

Covered Bonds Handbook shows why the future is now for covered bonds. In 2010, foreign banks sold approximately $35 billion in U.S. dollar denominated covered bonds in the United States. Be ready to capitalize on the hottest opportunity in the financial markets. This practical new guide features appendices with rating agency studies and reports • the texts of FDIC Interim and Final Policy Statements and the Treasury Department’s Best Practices for Residential Covered Bonds • UK covered bonds reference materials • sample U.S. covered bonds documents.

  Preface
  Table of Contents
Chapter 1: An Introduction to Covered Bonds
  • § 1:1 : Why Focus on Housing Finance?1-2
  • § 1:2 : The Financial Crisis1-3
  • § 1:3 : The Housing Boom1-4
  • § 1:4 : Mortgage Originations Pre-Securitization1-6
    • § 1:4.1 : Generally1-6
    • § 1:4.2 : The GSEs1-7
    • § 1:4.3 : The FHLB System1-7
  • § 1:5 : Securitization1-8
    • § 1:5.1 : Generally1-8
    • § 1:5.2 : Innovation in the Securitization Market1-11
    • § 1:5.3 : REMIC Status and Mortgage Modifications1-13
    • § 1:5.4 : Accounting and Other Benefits1-13
  • § 1:6 : Covered Bonds1-14
    • § 1:6.1 : Generally1-14
    • § 1:6.2 : Benefits1-14
    • § 1:6.3 : Differences Between Covered Bonds and Securitization1-15
    • § 1:6.4 : The Covered Bond Market1-17
    • § 1:6.5 : Contractual or “Structured” Covered Bonds1-17
    • § 1:6.6 : Disadvantages Associated with Contractual Covered Bonds1-17
  • § 1:7 : Development of Covered Bonds in the United States1-18
    • § 1:7.1 : Generally1-18
    • § 1:7.2 : Regulatory Guidance in the United States Regarding Covered Bonds1-19
    • § 1:7.3 : FDIC Policy Statement1-20
    • § 1:7.4 : Treasury Best Practices1-22
    • § 1:7.5 : Test Case1-23
  • § 1:8 : Proposed Covered Bond Legislation1-24
    • § 1:8.1 : Generally1-24
    • § 1:8.2 : Effect of Legislation on U.S. Covered Bonds1-25
  • § 1:9 : Challenges for Securitization1-26
    • § 1:9.1 : Future of the GSEs1-26
    • § 1:9.2 : Other Regulatory and Accounting Developments1-28
  • § 1:10 : Conclusion1-29
Chapter 2: History of Covered Bonds Outside the United States
  • § 2:1 : Germany2-5
    • § 2:1.1 : Origins2-5
    • § 2:1.2 : Jumbo Pfandbriefe2-6
    • § 2:1.3 : Pfandbrief Act of 20052-7
      • [A] : Generally2-7
      • [B] : Reform Act and Further Amendments to the Pfandbrief Act of 20052-9
  • § 2:2 : Rest of Europe2-11
    • § 2:2.1 : France2-11
      • [A] : Development2-11
      • [B] : Forms of Covered Bonds2-12
      • [C] : Obligations Fonciéres (ObF)2-12
        • [C][1] : Issuer2-12
        • [C][2] : Eligible Cover Pool2-13
        • [C][3] : Collateralization Requirements2-14
        • [C][4] : Post-Insolvency Investor Protections2-14
      • [D] : Obligations de financement de l’habitat (OFH) (former structured covered bonds)2-14
        • [D][1] : Issuer2-14
        • [D][2] : Eligible Cover Pool2-16
        • [D][3] : Collateralization Requirements2-16
        • [D][4] : Post-Insolvency Investor Protections2-16
    • § 2:2.2 : Spain2-17
      • [A] : Legislation2-17
        • [A][1] : Previous Legislation2-17
        • [A][2] : Current Legislation2-18
      • [B] : Types of Covered Bonds2-18
        • [B][1] : Mortgage Covered Bonds2-18
          • [B][1][a] : Issuer2-18
          • [B][1][b] : Legal Requirements2-18
          • [B][1][c] : CHs2-19
          • [B][1][d] : BHs2-20
          • [B][1][e] : Issuance Limits2-20
          • [B][1][f] : Special Preference and Insolvency of the Issuer2-20
        • [B][2] : Public-Sector Covered Bonds2-21
        • [B][3] : Public Internationalization Covered Bonds2-21
      • [C] : Documentation2-23
        • [C][1] : Issuance2-23
        • [C][2] : Listing2-24
      • [D] : Covered Bonds and Securitization—Main Differences2-24
    • § 2:2.3 : United Kingdom2-24
      • [A] : Pre-Legislation2-24
        • [A][1] : Historically2-24
        • [A][2] : Contractual Framework2-25
      • [B] : Post-Legislation2-26
        • [B][1] : Generally2-26
        • [B][2] : Article 52(4) Compliance2-27
        • [B][3] : Implementing Regulations2-28
        • [B][4] : 2008 Amendments to the UK Regulations2-30
        • [B][5] : 2011 Amendments to the UK Regulations2-30
        • [B][6] : 2012 Amendments to the UK Regulations2-33
      • [C] : Conclusion2-33
  • § 2:3 : Canada2-34
    • § 2:3.1 : Origins2-34
    • § 2:3.2 : Development2-35
      • [A] : Large Financial Institutions2-35
      • [B] : Small Financial Institutions2-35
      • [C] : Contractual Framework2-36
      • [D] : Introduction of Legislative (Regulated) Covered Bond Framework2-37
  • § 2:4 : Asia2-37
    • § 2:4.1 : Korea2-37
      • [A] : Development2-37
      • [B] : Securitization Techniques2-38
      • [C] : Kookmin Bank Covered Bonds Issuance2-38
        • [C][1] : Generally2-38
        • [C][2] : Structure2-39
        • [C][3] : Significant Characteristics2-40
          • [C][3][a] : Generally2-40
          • [C][3][b] : Utilizing the Trust Structure—Bankruptcy Remoteness of the Trust2-41
          • [C][3][c] : Utilizing the ABS Act2-42
            • [C][3][c][i] : Abbreviated Process for Perfection2-42
            • [C][3][c][ii] : Exemption from Mortgage Transfer Registration Requirement2-42
            • [C][3][c][iii] : Crystallization of Kun-Mortgage2-42
        • [C][4] : Major Legal Issues2-43
          • [C][4][a] : Avoidance and Fraudulent Conveyance Risk in Light of Overcollateralization Level2-43
          • [C][4][b] : Set-Off Risk2-44
          • [C][4][c] : Withholding Tax2-45
          • [C][4][d] : Negative Pledge Issue2-45
        • [C][5] : Major Commercial Features2-45
          • [C][5][a] : Asset Coverage Test2-45
          • [C][5][b] : Amortization Test2-45
          • [C][5][c] : Revolving Suspension Events2-46
      • [D] : KHFC Covered Bonds Issuance2-46
        • [D][1] : Generally2-46
        • [D][2] : Structure2-47
        • [D][3] : Mortgage Loans2-48
        • [D][4] : KHFC Act and Other Korean Legal Issues2-48
          • [D][4][a] : Statutory Priority Right of Payment2-48
          • [D][4][b] : Rights of Investors Under KHFC Act2-49
          • [D][4][c] : Perfection2-49
          • [D][4][d] : Avoidance and Fraudulent Conveyance Risk of Swap Novation2-50
      • [E] : Moving Forward2-50
        • [E][1] : Generally2-50
        • [E][2] : The Act on Issuance of Covered Bonds2-51
    • § 2:4.2 : Japan2-52
      • [A] : Background2-52
      • [B] : Shinsei Bank: Almost, But Not Quite2-52
        • [B][1] : Background2-52
        • [B][2] : Basic Structure2-53
        • [B][3] : Shinsei Bonds and “Typical” Structured Covered Bonds—Differences2-53
      • [C] : Certain Legal Issues2-55
        • [C][1] : No Intercompany Loan Between the Issuer and the Guarantor; Payments of Principal and Interest Made by the Guarantor Not the Issuer2-55
        • [C][2] : No Security Over the Obligation of the Guarantor2-55
        • [C][3] : Nature of the Asset Pool2-55
        • [C][4] : Need for Covered Bonds Legislation?2-56
        • [C][5] : Comparison of the Shinsei Bank Structure and Securitization2-57
      • [D] : Recent Developments2-57
        • [D][1] : Published Studies2-57
        • [D][2] : Bankruptcy Remoteness2-57
        • [D][3] : True Sale2-58
        • [D][4] : Liquidity of the SPE2-58
        • [D][5] : Appraisal and Monitoring of Cover Pool Assets; Supervision of the Sponsor and the SPE2-58
        • [D][6] : Protection of Depositors and Other Creditors of Financial Institution2-58
        • [D][7] : Government Reaction2-59
Chapter 3: Covered Bond Case Study—Germany
  • § 3:1 : Overview3-2
  • § 3:2 : Legislation3-3
    • § 3:2.1 : Special Public Supervision, License to Issue Pfandbriefe3-3
      • [A] : Generally3-3
      • [B] : Granting of Licenses3-3
      • [C] : Permanent Supervision and Cover Audits3-4
      • [D] : Cover Pool Monitors3-5
    • § 3:2.2 : Insolvency Remoteness of Pfandbriefe3-5
      • [A] : Segregation of the Cover Assets3-5
      • [B] : Cover Pool Administrator3-7
    • § 3:2.3 : Cover Principle3-9
      • [A] : Generally3-9
      • [B] : Cover Assets for Mortgage Pfandbriefe3-9
      • [C] : Cover Assets for Public Pfandbriefe3-11
      • [D] : Cover Assets for Ship Pfandbriefe3-13
      • [E] : Cover Assets for Aircraft Pfandbriefe3-14
      • [F] : Additional Other Assets for All Types of Pfandbriefe3-14
    • § 3:2.4 : Cover Register3-15
    • § 3:2.5 : Matching Cover3-16
      • [A] : Generally3-16
      • [B] : Nominal Value Cover3-16
      • [C] : Net Present Value Cover3-16
    • § 3:2.6 : Risk Management3-19
    • § 3:2.7 : Transparency of the Cover Pools3-19
    • § 3:2.8 : Risk Weight of Pfandbriefe3-21
      • [A] : Solvency Regime3-21
      • [B] : Large Exposures Regime3-22
    • § 3:2.9 : Repo Discount3-22
  • § 3:3 : Structure3-23
    • § 3:3.1 : Registered Versus Bearer Pfandbriefe3-23
    • § 3:3.2 : Documentation3-24
      • [A] : Prospectus3-24
      • [B] : Subscription Agreement3-26
      • [C] : Confirmation Certificate by Cover Pool Monitor3-26
      • [D] : Fiscal Agency Agreement3-27
      • [E] : Global Note and Terms and Conditions3-27
    • § 3:3.3 : Parties3-28
    • § 3:3.4 : Listing3-28
    • § 3:3.5 : Issuance of Jumbo Pfandbriefe3-28
      • [A] : Minimum Standards3-28
        • [A][1] : Minimum Issue Size3-29
        • [A][2] : Format3-29
        • [A][3] : Stock Market Listing3-29
        • [A][4] : Syndicate Banks3-29
        • [A][5] : Quoting3-29
        • [A][6] : Publishing of Average Spreads3-29
        • [A][7] : Transfer and Buyback3-30
        • [A][8] : Loss of Jumbo Pfandbrief Status3-30
      • [B] : Recommendations3-30
    • § 3:3.6 : Investor Base3-31
Chapter 4: Covered Bond Case Study—United Kingdom
  • § 4:1 : Covered Bond Structure4-2
    • § 4:1.1 : Transaction Structure4-2
    • § 4:1.2 : Regulated Covered Bonds Versus Unregulated Covered Bonds4-3
    • § 4:1.3 : Issue Proceeds/Intercompany Loan4-5
    • § 4:1.4 : Guarantee/Security Over Asset Pool4-5
    • § 4:1.5 : Liability of the Issuer and the Guarantor4-6
    • § 4:1.6 : Interest Rate and Currency Exchange Hedging4-6
    • § 4:1.7 : Cash Flows—Unregulated and Regulated Covered Bonds4-7
    • § 4:1.8 : Ownership Structure of the Guarantor4-8
    • § 4:1.9 : Asset Coverage Test4-10
    • § 4:1.10 : Amortization Test4-10
    • § 4:1.11 : Issuer Events of Default and Guarantor Events of Default4-11
      • [A] : Issuer Events of Default4-11
      • [B] : Guarantor Events of Default4-11
  • § 4:2 : Issuance Structure4-12
    • § 4:2.1 : Guarantee or No Guarantee4-12
    • § 4:2.2 : Continuous Issuance Program4-13
  • § 4:3 : Parties4-14
    • § 4:3.1 : Issuer4-14
    • § 4:3.2 : Seller(s)4-15
    • § 4:3.3 : Guarantor4-15
    • § 4:3.4 : Bond Trustee4-16
    • § 4:3.5 : Security Trustee4-16
    • § 4:3.6 : Swap Providers4-17
    • § 4:3.7 : Servicer4-17
    • § 4:3.8 : Asset Pool Monitor4-17
    • § 4:3.9 : Principal Paying Agent/Paying Agent4-17
    • § 4:3.10 : Arranger4-18
    • § 4:3.11 : Dealers4-18
    • § 4:3.12 : Guaranteed Investment Contract Provider4-19
    • § 4:3.13 : Other Parties4-19
  • § 4:4 : Documentation4-19
    • § 4:4.1 : Mortgage Sale Agreement4-19
    • § 4:4.2 : Servicing Agreement4-21
    • § 4:4.3 : Intercompany Loan Agreement4-22
    • § 4:4.4 : Guarantee of the Covered Bonds4-22
    • § 4:4.5 : Asset Pool Monitor Agreement4-22
    • § 4:4.6 : Swap Agreements4-23
    • § 4:4.7 : Program Agreement4-23
    • § 4:4.8 : Trust Deed4-24
    • § 4:4.9 : Deed of Charge4-25
    • § 4:4.10 : Agency Agreement4-25
    • § 4:4.11 : Cash Management Agreement4-25
    • § 4:4.12 : Account Agreement4-26
    • § 4:4.13 : Guaranteed Investment Contract4-26
    • § 4:4.14 : Corporate Services Agreement4-26
    • § 4:4.15 : Legal Opinions4-26
  • § 4:5 : Listing4-27
    • § 4:5.1 : Generally4-27
    • § 4:5.2 : Prospectus Directive and Prospectus Regulation4-28
  • § 4:6 : Legal Issues4-30
    • § 4:6.1 : Insolvency4-30
    • § 4:6.2 : Fraudulent Transfers4-32
    • § 4:6.3 : Set-Off Issues4-33
    • § 4:6.4 : Consumer Credit Act of 19744-34
    • § 4:6.5 : Unfair Terms in Consumer Contracts Regulations of 1994 and 19994-35
Chapter 5: Covered Bond Case Study—Canada
  • § 5:1 : Development of Canadian Covered Bond Programs5-2
    • § 5:1.1 : Structured Covered Bond Issuance from 2007 to 20135-2
    • § 5:1.2 : Adoption by Canadian Banks of UK Contractual Structure5-6
    • § 5:1.3 : Introduction of a Legislative Covered Bond Regime5-7
  • § 5:2 : Framework for Canadian Covered Bond Programs5-9
    • § 5:2.1 : Transaction Structure5-9
    • § 5:2.2 : Issue Proceeds and the Intercompany Loan5-11
    • § 5:2.3 : Guarantee and Grant of Security Over the Cover Pool5-12
    • § 5:2.4 : Composition of the Cover Pool5-13
    • § 5:2.5 : Liability of the Issuer and the Guarantor5-14
    • § 5:2.6 : Interest Rate and Currency Exchange Hedging5-14
    • § 5:2.7 : Ownership Structure of the Guarantor5-15
    • § 5:2.8 : Asset Coverage Test5-16
    • § 5:2.9 : Amortization Test5-16
    • § 5:2.10 : Pre-Maturity Test5-17
    • § 5:2.11 : Issuer Events of Default5-17
    • § 5:2.12 : Guarantor Events of Default5-18
    • § 5:2.13 : Terms of the Intercompany Loan Agreement5-18
  • § 5:3 : Parties5-20
    • § 5:3.1 : Issuer5-20
    • § 5:3.2 : Guarantor5-20
    • § 5:3.3 : Bond Trustee5-21
    • § 5:3.4 : Swap Providers5-21
    • § 5:3.5 : Asset Monitor5-22
    • § 5:3.6 : Principal Paying Agent/Paying Agent5-22
    • § 5:3.7 : Arranger5-22
    • § 5:3.8 : Dealers5-22
    • § 5:3.9 : Guaranteed Investment Contract Providers5-23
  • § 5:4 : Prospectus and Listing Requirements5-23
  • § 5:5 : Program Documentation5-25
  • § 5:6 : Resilience of Covered Bonds Programs Following the Financial Crisis5-26
  • § 5:7 : Comparative Housing Finance Models5-28
Chapter 5A: Covered Bond Case Study—Australia
  • § 5A:1 : Overview5A-3
    • § 5A:1.1 : Covered Bonds in Australia5A-3
      • [A] : General Framework for Issuance5A-3
      • [B] : Development of the Australian Covered Bond Market5A-4
    • § 5A:1.2 : Structure Diagram5A-4
  • § 5A:2 : Regulation of Covered Bonds in Australia5A-6
    • § 5A:2.1 : Introduction of Covered Bonds to Australia5A-6
    • § 5A:2.2 : Banking Act Framework for Covered Bonds5A-7
      • [A] : Overview and Application5A-7
      • [B] : Statutory Definition of a Covered Bond5A-7
      • [C] : Limitation on Issuance—The 8% Cap5A-8
      • [D] : Covered Bond Special Purpose Vehicle5A-9
      • [E] : Cover Pool5A-9
        • [E][1] : Determination of the Cover Pool5A-9
        • [E][2] : Assets that Can Be Included in a Cover Pool5A-10
      • [F] : Size of the Cover Pool—Statutory Minimum Over-Collateralization5A-10
      • [G] : Cover Pool Monitor5A-11
      • [H] : Aggregation Structure5A-11
      • [I] : APRA’s Powers Relating to Covered Bonds5A-11
      • [J] : Other Relevant Provisions of the Banking Act5A-12
    • § 5A:2.3 : Prudential Standard 121 (APS 121)5A-13
  • § 5A:3 : Structure of Australian Covered Bond Programmes5A-14
    • § 5A:3.1 : Issuance5A-14
    • § 5A:3.2 : Intercompany Loans5A-14
      • [A] : Purpose5A-14
      • [B] : Intercompany Loan5A-15
      • [C] : Demand Loan5A-15
    • § 5A:3.3 : Covered Bond Guarantee5A-16
    • § 5A:3.4 : Derivatives5A-17
    • § 5A:3.5 : Bond Trust5A-18
    • § 5A:3.6 : Security Structure5A-19
    • § 5A:3.7 : Limited Recourse5A-19
    • § 5A:3.8 : Asset Tests5A-19
      • [A] : Generally5A-19
      • [B] : Asset Coverage Test5A-19
      • [C] : Amortization Test5A-20
      • [D] : Pre-Maturity Test5A-20
    • § 5A:3.9 : Events of Default5A-20
      • [A] : Issuer Events of Default5A-20
      • [B] : CB Guarantor Events of Default5A-21
    • § 5A:3.10 : CB Trust Cash Flows5A-21
  • § 5A:4 : Parties5A-22
    • § 5A:4.1 : Issuer5A-22
    • § 5A:4.2 : Covered Bond Guarantor5A-22
    • § 5A:4.3 : Seller5A-22
    • § 5A:4.4 : Loan Provider5A-22
    • § 5A:4.5 : Manager5A-22
    • § 5A:4.6 : Servicer5A-23
    • § 5A:4.7 : Cover Pool Monitor5A-23
    • § 5A:4.8 : Security Trustee5A-23
    • § 5A:4.9 : Bond Trustee5A-23
    • § 5A:4.10 : Swap Counterparties5A-23
    • § 5A:4.11 : Account Bank5A-24
    • § 5A:4.12 : Agents5A-24
    • § 5A:4.13 : Dealers5A-24
    • § 5A:4.14 : Unitholders5A-24
  • § 5A:5 : Program Documents5A-24
    • § 5A:5.1 : General5A-24
    • § 5A:5.2 : Trust Deed5A-25
    • § 5A:5.3 : Participation Agreement5A-25
    • § 5A:5.4 : Mortgage Sale Agreement5A-25
    • § 5A:5.5 : Servicing Agreement5A-25
    • § 5A:5.6 : Management Agreement5A-26
    • § 5A:5.7 : Security Documents5A-26
    • § 5A:5.8 : Bond Trust Deed5A-26
    • § 5A:5.9 : Bank Account Agreement5A-27
    • § 5A:5.10 : Swap Agreements5A-27
    • § 5A:5.11 : Cover Pool Monitor Agreement5A-27
    • § 5A:5.12 : Intercompany Loan Agreement5A-27
    • § 5A:5.13 : Demand Loan Agreement5A-27
    • § 5A:5.14 : Australian CB Deed Poll5A-28
    • § 5A:5.15 : Agency Agreements5A-28
    • § 5A:5.16 : Final Terms5A-28
  • § 5A:6 : Listing5A-28
    • § 5A:6.1 : Listing on the Australian Securities Exchange5A-28
    • § 5A:6.2 : Listing on Other Securities Exchanges5A-29
  • § 5A:7 : Other Australian Legal Issues5A-29
    • § 5A:7.1 : Generally5A-29
    • § 5A:7.2 : Equitable Assignment of the Mortgage Loans5A-29
    • § 5A:7.3 : Set-off5A-30
    • § 5A:7.4 : Personal Property Securities Act5A-31
    • § 5A:7.5 : Insolvent Transactions5A-32
    • § 5A:7.6 : True Sale5A-33
    • § 5A:7.7 : Australian Consumer Credit Laws5A-33
    • § 5A:7.8 : Financial Services Licensing Regime5A-34
    • § 5A:7.9 : Securities Laws5A-34
    • § 5A:7.10 : Australian Taxation5A-35
Chapter 6: Non-U.S. Covered Bonds Market
  • § 6:1 : Overall Trends6-2
    • § 6:1.1 : Changes to Bank Funding Strategies6-2
    • § 6:1.2 : Liquidity As a Fundamental Driver for Covered Bonds6-4
    • § 6:1.3 : Investor Confidence As an Important Factor to Bolster Financial Markets6-5
    • § 6:1.4 : Basel III and Covered Bonds6-6
  • § 6:2 : Market Trends6-7
    • § 6:2.1 : Generally6-7
    • § 6:2.2 : Covered Bond Market Growth6-8
      • [A] : Increase in Issuances6-8
      • [B] : Increase in Issuing Entities6-11
    • § 6:2.3 : Covered Bond Performance6-11
  • § 6:3 : Structural Trends6-14
    • § 6:3.1 : Maturities6-14
    • § 6:3.2 : Rates6-17
    • § 6:3.3 : Deal Size6-17
    • § 6:3.4 : Issuers6-18
    • § 6:3.5 : Ratings6-20
    • § 6:3.6 : Market Making6-23
  • § 6:4 : Trends by Country6-25
    • § 6:4.1 : Germany6-25
    • § 6:4.2 : France6-26
    • § 6:4.3 : Luxembourg6-27
    • § 6:4.4 : Spain6-30
    • § 6:4.5 : Rest of Europe6-31
    • § 6:4.6 : United Kingdom6-32
    • § 6:4.7 : Canada6-34
      • [A] : Generally6-34
      • [B] : Stable Housing Market6-34
Chapter 7: Covered Bond Ratings
  • § 7:1 : Importance of Ratings for Issuers and Investors7-3
    • § 7:1.1 : Generally7-3
    • § 7:1.2 : Leading Agencies’ Approach to Ratings7-4
      • [A] : Convergence of Methodologies7-4
      • [B] : Differences in Methodologies7-4
        • [B][1] : Moody’s7-4
        • [B][2] : Fitch7-5
        • [B][3] : S&P7-5
      • [C] : Ratings Analysis During the Financial Crisis7-6
  • § 7:2 : Moody’s—Rating Covered Bonds7-7
    • § 7:2.1 : Framework7-7
      • [A] : Generally7-7
      • [B] : Expected Loss7-7
      • [C] : Timely Payment Indicator (TPI)7-8
    • § 7:2.2 : Main Drivers of the Rating7-9
      • [A] : Strength of the Sponsor Bank7-10
      • [B] : Credit Quality of the Cover Pool7-10
      • [C] : Refinancing Risk7-11
      • [D] : Market (Interest Rate and Currency) Risk7-12
    • § 7:2.3 : Issues for U.S. Covered Bonds7-13
      • [A] : Generally7-13
      • [B] : Scenarios Following a Sponsor Bank Default7-14
      • [C] : Exposure to Exacerbated Refinancing Risk—Rating Implications7-16
    • § 7:2.4 : Rating Process7-17
  • § 7:3 : Fitch—Rating Covered Bonds7-18
    • § 7:3.1 : Background7-18
    • § 7:3.2 : Summary of Rating Criteria7-19
    • § 7:3.3 : Maximum Achievable Rating on a PD Basis7-20
      • [A] : Step 1—Setting the IDR Uplift7-20
      • [B] : Step 2—Defining the D-Cap7-21
    • § 7:3.4 : Covered Bond Counterparty Criteria7-22
    • § 7:3.5 : Example of a Covered Bonds Rating7-23
      • [A] : Step 1—Determining the Maximum Achievable Rating on a PD Basis7-23
      • [B] : Step 2—Stress-Testing Overcollateralization to Set the Covered Bond PD Rating7-24
      • [C] : Step 3—Calculating the Recovery Uplift7-25
    • § 7:3.6 : Current U.S. Covered Bond Program Features7-26
  • § 7:4 : S&P—Rating Covered Bonds7-27
    • § 7:4.1 : Background7-27
    • § 7:4.2 : Historic Analytical Framework7-28
      • [A] : Legal Framework7-28
      • [B] : Asset Quality of the Cover Pool7-29
      • [C] : Cash Flow Analysis7-30
      • [D] : Overcollateralization7-30
    • § 7:4.3 : Changes to Ratings Methodology7-30
      • [A] : The 2009 Asset-Liability Mismatch (ALMM) Criteria7-31
        • [A][1] : Generally7-31
        • [A][2] : Basic Concepts7-32
          • [A][2][a] : Step 1: Calculation and Classification of the ALMM7-33
          • [A][2][b] : Step 2: Program Categorization7-34
          • [A][2][c] : Step 3: The Maximum Potential Covered Bond Rating7-34
          • [A][2][d] : Step 4: Cash Flow and Market Value Analysis7-34
          • [A][2][e] : Step 5: The Covered Bond Rating7-35
      • [B] : The 2010 Counterparty Criteria7-35
        • [B][1] : Generally7-35
        • [B][2] : Basic Concepts7-36
          • [B][2][a] : Types of Counterparty Risk7-36
          • [B][2][b] : Replacement Framework7-36
      • [C] : Proposed Covered Bonds Counterparty Criteria7-37
        • [C][1] : Generally7-37
        • [C][2] : Basic Concepts7-37
          • [C][2][a] : Step 1: Differentiating by the Number of Derivative Counterparties7-38
          • [C][2][b] : Step 2: Calculating the Weighted-Average Rating on Derivative Counterparties7-39
          • [C][2][c] : Step 3: Determining the Adjustment to the Maximum Potential Covered Bond Rating by Reference to the ICR of the Covered Bond Issuer7-39
        • [C][3] : Comments on the Proposed Counterparty Criteria7-40
Chapter 8: Alternative Funding Sources
  • § 8:1 : Reasons for Issuers to Consider Covered Bonds8-3
    • § 8:1.1 : Generally8-3
    • § 8:1.2 : Issuer Advantages8-5
      • [A] : Generally8-5
      • [B] : Competitiveness Versus FHLB Advances8-6
      • [C] : Diversification8-9
      • [D] : Longer Maturity Financing8-10
      • [E] : Operational Flexibility8-11
      • [F] : Overcollateralization8-11
    • § 8:1.3 : Issuer Disadvantages8-12
      • [A] : Capital Relief8-12
      • [B] : Prepayment, Default, and Interest Rate Risk8-13
      • [C] : Consequences of Default8-15
      • [D] : Regulatory Risk8-16
      • [E] : Counterparty Risk on Swaps8-17
      • [F] : Issuance Limit8-18
    • § 8:1.4 : Investor Advantages8-20
      • [A] : Generally8-20
      • [B] : Dual Recourse Structure8-20
      • [C] : High Credit Quality8-21
      • [D] : Lack of Prepayment Risk8-23
      • [E] : Attractive Yield8-24
      • [F] : Liquidity8-26
    • § 8:1.5 : Investor Disadvantages8-29
      • [A] : Generally8-29
      • [B] : Lack of Legislative Framework8-29
      • [C] : Decline in Appetite for U.S. Financial Sector Exposure8-30
  • § 8:2 : Historic Funding Model for U.S. Mortgage Loans (Housing Finance)8-31
    • § 8:2.1 : Development of GSEs8-31
    • § 8:2.2 : FHLB8-33
      • [A] : Generally8-33
      • [B] : History8-33
      • [C] : Ownership Structure8-34
        • [C][1] : Generally8-34
        • [C][2] : Dividends8-35
      • [D] : Financing8-35
      • [E] : Advances8-36
    • § 8:2.3 : GSE and Private Securitization8-36
      • [A] : Early Days of MBS8-36
      • [B] : CMOs8-37
      • [C] : Structuring Non-Agency MBS8-38
      • [D] : Credit Enhancement8-38
      • [E] : Subprime Market8-39
    • § 8:2.4 : Growth of the Securitization Market8-39
      • [A] : Growth of the Agency and Non-Agency Markets8-39
      • [B] : Factors Driving the Growth of Mortgage Securitization8-41
  • § 8:3 : Securitization Compared to Covered Bonds8-41
    • § 8:3.1 : Recourse and Credit Enhancement8-41
    • § 8:3.2 : Prepayment Risk8-43
    • § 8:3.3 : Accounting8-43
    • § 8:3.4 : Liquidity8-44
    • § 8:3.5 : Ratings8-47
    • § 8:3.6 : Assets8-47
    • § 8:3.7 : Investors8-47
  • § 8:4 : FHLB Advances Compared to Covered Bonds8-48
    • § 8:4.1 : Assets/Collateral8-48
    • § 8:4.2 : Recourse8-49
    • § 8:4.3 : Member Credit Limits8-50
    • § 8:4.4 : Term Structure8-50
    • § 8:4.5 : Potential for Regulatory Reform8-51
    • § 8:4.6 : Funding Cost8-53
  • § 8:5 : Prospects for Covered Bonds in the Post Financial Crisis Economy8-53
Chapter 9: History and Development of Covered Bonds in the United States
  • § 9:1 : Overview9-2
  • § 9:2 : Background on Receivership9-4
  • § 9:3 : Guidance from the FDIC9-7
    • § 9:3.1 : Generally9-7
    • § 9:3.2 : Interim Final Policy Statement9-8
      • [A] : Scope9-8
      • [B] : Issues9-9
      • [C] : Comments9-10
        • [C][1] : Generally9-10
        • [C][2] : Clarify the Receivership Process9-11
        • [C][3] : Confirm that the FDIC Will Pay Damages in the Case of Repudiation9-12
        • [C][4] : Abolish the 4% Cap on Total Covered Bond Liabilities9-13
        • [C][5] : Relax the Strictures on Permitted Collateral9-14
        • [C][6] : Other Recommendations9-16
    • § 9:3.3 : Final Policy Statement9-17
      • [A] : Generally9-17
      • [B] : Scope9-17
      • [C] : Issues9-18
  • § 9:4 : Treasury Best Practices9-20
    • § 9:4.1 : Intent9-20
    • § 9:4.2 : Scope9-21
      • [A] : Cover Pool9-21
      • [B] : Payments9-22
      • [C] : Disclosure9-23
      • [D] : Defaults9-23
      • [E] : Other Details9-24
      • [F] : Conclusion9-24
Chapter 10: U.S. Covered Bond Case Study and Regulatory Framework
  • § 10:1 : Pre-FDIC and Treasury Guidance10-3
    • § 10:1.1 : Case Study: Washington Mutual and Bank of America Covered Bond Programs10-3
    • § 10:1.2 : How WaMu Covered Bond Holders Fared10-5
    • § 10:1.3 : Rating Experience of U.S. Covered Bonds10-6
  • § 10:2 : Post-FDIC and Treasury Guidance10-7
    • § 10:2.1 : Structural Options10-7
      • [A] : Single-Tier10-7
      • [B] : Two-Tier10-11
    • § 10:2.2 : Payment Flows of U.S. Covered Bonds10-12
      • [A] : Generally10-12
      • [B] : Two-Tier10-12
        • [B][1] : Generally10-12
        • [B][2] : Overview of Payment Flows10-13
        • [B][3] : Payment Flows—Mortgage Bond Issuer Rating Downgrade10-14
        • [B][4] : Payment Flows—Mortgage Bond Acceleration10-15
        • [B][5] : Payment Flows—Covered Bond Acceleration10-15
      • [C] : Single-Tier10-16
  • § 10:3 : Regulatory Framework10-17
    • § 10:3.1 : Generally10-17
    • § 10:3.2 : SEC Registration and Exemptions10-17
      • [A] : Generally10-17
      • [B] : SEC Registration and Disclosure Requirements10-18
      • [C] : Offering-Related Exemptions10-24
        • [C][1] : Rule 144A10-24
        • [C][2] : Regulation S10-25
        • [C][3] : Section 4(a)(2) and Regulation D10-25
      • [D] : Issuer-Related Exemptions10-26
        • [D][1] : Section 3(a)(2)10-26
        • [D][2] : Section 3(a)(5)10-28
        • [D][3] : Benefits of a Securities Act Issuer Exemption10-28
      • [E] : Banking Agency Offering Document Filing and Review Requirements10-30
        • [E][1] : Generally10-30
        • [E][2] : OCC Registration Statement Requirements for Banks10-31
        • [E][3] : OCC Offering Circular Requirements for Savings Associations10-34
    • § 10:3.3 : Investment Company Act of 194010-35
      • [A] : Generally10-35
      • [B] : Single-Tier Exemptions10-37
      • [C] : Two-Tier Exemptions10-39
        • [C][1] : Generally10-39
        • [C][2] : Rule 3a-710-40
        • [C][3] : Section 3(c)(5)(C)10-41
        • [C][4] : Builder Bond Exemption10-42
        • [C][5] : Sections 3(c)(5)(A) and 3(c)(5)(B)—Non-Mortgage Collateral10-44
        • [C][6] : Future of Rule 3a-7 and Section 3(c)(5)10-45
        • [C][7] : SEC Exemptive Orders10-46
    • § 10:3.4 : Volcker Rule10-47
      • [A] : Overview10-47
        • [A][1] : Generally10-47
        • [A][2] : Conformance Period10-48
        • [A][3] : Banking Entities10-48
      • [B] : Proprietary Trading10-49
      • [C] : Covered Funds Activities and Investments10-50
        • [C][1] : Generally10-50
        • [C][2] : Definition of a Covered Fund10-51
          • [C][2][a] : Funds Exempt from the Definition of Investment Company10-51
          • [C][2][b] : Commodity Pools10-51
          • [C][2][c] : Foreign Covered Funds10-52
        • [C][3] : Entities Excluded from the Definition of Investment Company Under the Investment Advisers Act10-52
        • [C][4] : Entities Excluded from the Definition of Covered Fund10-53
          • [C][4][a] : Qualifying Covered Bond Exclusion10-53
          • [C][4][b] : Foreign Public Fund Exclusion10-54
          • [C][4][c] : Loan Securitization Exclusion10-55
          • [C][4][d] : Wholly-Owned Subsidiary Exclusion10-55
        • [C][5] : Scope of Prohibition10-56
          • [C][5][a] : Sponsorship10-56
          • [C][5][b] : Ownership Interests10-56
        • [C][6] : Permitted Covered Fund Sponsorship and Investments10-57
          • [C][6][a] : Organizing and Offering an Issuing Entity of Asset-Backed Securities10-57
          • [C][6][b] : Permitted Risk Retention10-58
        • [C][7] : Limitations on Relationships with Certain Covered Funds: “Super 23A”10-58
        • [C][8] : Fund Investment and Sponsorship by FBOs Solely Outside the United States10-60
    • § 10:3.5 : Trust Indenture Act of 193910-61
    • § 10:3.6 : Security Interest Perfection and Foreclosure Issues10-62
Chapter 11: Documentation of U.S. Covered Bonds
  • § 11:1 : Overview of Existing U.S. Covered Bond Structures11-2
    • § 11:1.1 : Two-Tier Structure11-2
    • § 11:1.2 : Unusual Features11-3
    • § 11:1.3 : Documentation11-4
  • § 11:2 : Program Establishment Documentation11-5
    • § 11:2.1 : Generally11-5
    • § 11:2.2 : Prospectus11-6
      • [A] : Generally11-6
      • [B] : Noteworthy Prospectus Sections11-8
        • [B][1] : Terms and Conditions of the Covered Bonds11-8
        • [B][2] : Final Terms and Drawdown Prospectuses11-9
        • [B][3] : Subscription and Sale11-9
        • [B][4] : Transfer Restrictions11-10
    • § 11:2.3 : Mortgage Bond Indenture11-10
      • [A] : Generally11-10
      • [B] : Asset Coverage Test11-11
      • [C] : Events of Default11-12
    • § 11:2.4 : Delaware Series Trust11-13
    • § 11:2.5 : Covered Bond Indenture11-15
      • [A] : Generally11-15
      • [B] : Terms and Conditions11-15
      • [C] : Cash Flow Distributions11-16
        • [C][1] : Prior to Mortgage Bond and Covered Bond Accelerations11-16
        • [C][2] : After Mortgage Bond Acceleration and Prior to Covered Bond Acceleration11-17
        • [C][3] : After Covered Bond Acceleration11-18
      • [D] : Events of Default11-19
    • § 11:2.6 : Asset Monitor Agreement11-21
    • § 11:2.7 : Program Agreement11-21
  • § 11:3 : Issuance Documentation11-22
    • § 11:3.1 : Final Terms11-22
    • § 11:3.2 : Mortgage Bond Indenture Series Supplement11-23
    • § 11:3.3 : Mortgage Bond Purchase Agreement11-23
    • § 11:3.4 : Series Trust Supplement11-23
    • § 11:3.5 : Covered Bond Indenture Series Supplement11-24
    • § 11:3.6 : Covered Bond Swap Agreement11-24
    • § 11:3.7 : Investment Agreement11-26
    • § 11:3.8 : Subscription Agreement11-27
  Selected Rating Agency Studies and Reports
Appendix A1: Moody’s Investor Service—Rating Approach to Covered Bonds
Appendix A2: Moody’s Investor Service—Legal Checklist for EU Covered Bonds
Appendix A3: Moody’s Investor Service—EMEA Covered Bonds: 2010 Outlook & 2009 Review
Appendix A4: Moody’s Investor Service—FAQ U.S. Covered Bonds
Appendix A5: Moody’s Investor Service—U.S. Covered Bonds: Industry Gears Up to Propose Comprehensive Legislative Framework; Banks to Benefit
Appendix A6: Moody’s Investor Service—Limited Credit Impact from Proposed U.S. Covered Bond Legislation
Appendix A7: Moody’s Investor Service—U.S. Covered Bonds Overhaul Would Be Credit Positive Overall
Appendix A8: Moody’s Investor Services—Structured Finance in Focus: A Short Guide to Covered Bonds
Appendix A9: Moody’s Investor Services—New U.S. Covered Bond Bill Is Positive But Falls Short on Addressing Market Value Risk
Appendix A10: Moody’s Investor Services—FDIC Concedes Market Value Cap to Gain Repudiation Rights Over U.S. Bank-Sponsored Covered Bonds
Appendix A11: Fitch Ratings—Covered Bonds Rating Criteria
Appendix A12: Fitch Ratings—Assessment of Liquidity Risks in Covered Bonds
Appendix A13: Fitch Ratings—Impact of Covered Bonds Issuance on Banks Ratings
Appendix A14: Fitch Ratings—ABCs of U.S. Covered Bonds
Appendix A15: Standard & Poor’s—Report Clarifying Issuer Ratings for Covered Bonds
Appendix A16: Standard & Poor’s—Revised Methodology and Assumptions for Assessing Asset-Liability Mismatch Risk in Covered Bonds
  FDIC Policy Statements and Treasury Best Practices
Appendix B1: FDIC Interim Final Policy Statement on Covered Bonds
Appendix B2: FDIC Final Policy Statement on Covered Bonds
Appendix B3: The Department of the Treasury—Best Practices for Residential Covered Bonds
  U.K. Reference Materials
Appendix C1: Regulated Covered Bonds Sourcebook
Appendix C2: Regulated Covered Bonds Regulations 2008, As Amended
Appendix C3: FSA—Asset Pool Notification Form
Appendix C4: FSA—Series Issuance Notification Form
Appendix C5: FSA—Annual Confirmation of Compliance with Regulated Covered Bonds Regulations, 2008
Appendix C6: FSA—Application for Admission to the RCB Register
Appendix C7: FSA Letter to BBA—Covered Bond Issuance and Asset Encumbrance
  Sample U.S. Covered Bonds Documents
Appendix D1: Offering Memorandum
Appendix D2: Mortgage Bond Indenture
Appendix D3: Covered Bond Indenture
Appendix D4: Amended and Restated Declaration of Trust
Appendix D5: Mortgage Bond Purchase Agreement
Appendix D6: Asset Monitor Agreement
Appendix E: The German Pfandbrief Act Translation
  Table of Authorities
  Index

  Please click here to view the latest update information for this title: Last Update Information  
 


  Please click here to view the Table of Authorities: Table of Authorities  
 

Share
Email
UPKEEP SERVICE
Your purchase will also sign you up for “Upkeep Service,” whereby you will receive future automatic shipments of updates, new editions and supplements to this edition, as they become available, for a 30-day preview. Updates, new editions and supplements published within 90 days of your purchase will be issued free of charge; all other updates will be subject to an additional charge if kept beyond the preview period, invoiced at the time of delivery. This service will continue until canceled by you at any time. See here.

  • FOLLOW PLI:
  • twitter
  • LinkedIn
  • GooglePlus
  • RSS

All Contents Copyright © 1996-2017 Practising Law Institute. Continuing Legal Education since 1933.

© 2017 PLI PRACTISING LAW INSTITUTE. All rights reserved. The PLI logo is a service mark of PLI.