Essential Features of Covered Bonds

From: "The Pfandbrief 2008|2009 – Facts and Figures about Europe’s Covered Bond Benchmark", published by Association of German Pandbrief Banks, 13th edition, Berlin 2008

Covered bonds are characterised by the following common essential features that are achieved under special-law based frameworks or general-law based frameworks:

1. The bond is issued by – or bondholders otherwise have full recourse to – a credit institution which is subject to public supervision and regulation;

2. Bondholders have a claim against a cover pool of financial assets in priority to the unsecured creditors of the credit institutions;

3. The credit institution has the ongoing obligation to maintain sufficient assets in the cover pool to satisfy the claims of covered bondholders at all times;

4. The obligations of the credit institution in respect of the cover pool are supervised by public or other independent bodies.