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Directive (EU) 2019/2162 of the European Parliament and of the CouncilShow full title

Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on the issue of covered bonds and covered bond public supervision and amending Directives 2009/65/EC and 2014/59/EU (Text with EEA relevance)

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Section II Coverage and liquidity requirements

Article 15Coverage requirements

1.Member States shall ensure investor protection by requiring covered bond programmes to comply at all times with at least the coverage requirements laid down in paragraphs 2 to 8.

2.All liabilities of the covered bonds shall be covered by claims for payment attached to the cover assets.

3.The liabilities referred to in paragraph 2 shall include:

(a)

the obligations for the payment of the principal amount of outstanding covered bonds;

(b)

the obligations for the payment of any interest on outstanding covered bonds;

(c)

the payment obligations attached to derivative contracts held in accordance with Article 11; and

(d)

the expected costs related to maintenance and administration for the winding-down of the covered bond programme.

For the purposes of point (d) of the first subparagraph, Member States may allow a lump sum calculation.

4.The following cover assets shall be considered to contribute to the coverage requirement:

(a)

primary assets;

(b)

substitution assets;

(c)

liquid assets held in accordance with Article 16; and

(d)

claims for payment attached to derivative contracts held in accordance with Article 11.

Uncollateralised claims where a default is considered to have occurred pursuant to Article 178 of Regulation (EU) No 575/2013 do not contribute to coverage.

5.For the purposes of point (c) of the first subparagraph of paragraph 3 and point (d) of the first subparagraph of paragraph 4, Member States shall lay down rules on the valuation of derivative contracts.

6.The calculation of the required coverage shall ensure that the aggregate principal amount of all cover assets is equal to or exceeds the aggregate principal amount of outstanding covered bonds (‘nominal principle’).

Member States may allow for other principles of calculation, provided that they do not result in a higher ratio of coverage than that calculated under the nominal principle.

Member States shall lay down rules on the calculation of any interest payable in respect of outstanding covered bonds and interest receivable in respect of cover assets, which shall reflect sound prudential principles in accordance with applicable accounting standards.

7.By way of derogation from the first subparagraph of paragraph 6, Member States may, in a manner which reflects sound prudential principles and in accordance with applicable accounting standards, allow for future interest receivable on the cover asset net of future interest payable on the corresponding covered bond to be taken into consideration in order to balance any shortfall in coverage of the principal payment obligation attached to the covered bond where there is a close correspondence as defined in the applicable delegated regulation adopted pursuant to Article 33(4) of Regulation (EU) No 575/2013, subject to the following conditions:

(a)

payments received during the lifetime of the cover asset and necessary for coverage of the payment obligation attached to the corresponding covered bond are segregated in accordance with Article 12 or are included in the cover pool in the form of cover assets referred to in Article 6 until the payments become due; and

(b)

prepayment of the cover asset is only possible by way of exercising the delivery option, as defined in the applicable delegated regulation adopted pursuant to Article 33(4) of Regulation (EU) No 575/2013 or, in the case of covered bonds callable at par by the credit institution issuing the covered bonds, by way of the cover asset’s borrower paying at least the called covered bond’s par amount.

8.Member States shall ensure that the calculation of cover assets and liabilities is based on the same methodology. Member States may allow for different calculation methodologies for the calculation of cover assets on the one hand and liabilities on the other, provided that the use of such different methodologies does not result in a higher ratio of coverage than that calculated using the same methodology for the calculation of both cover assets and liabilities.

Article 16Requirement for a cover pool liquidity buffer

1.Member States shall ensure investor protection by requiring that the cover pool includes at all times a liquidity buffer composed of liquid assets available to cover the net liquidity outflow of the covered bond programme.

2.The cover pool liquidity buffer shall cover the maximum cumulative net liquidity outflow over the next 180 days.

3.Member States shall ensure that the cover pool liquidity buffer referred to in paragraph 1 of this Article consists of the following types of assets, segregated in accordance with Article 12 of this Directive:

(a)

assets qualifying as level 1, level 2A or level 2B assets pursuant to the applicable delegated regulation adopted pursuant to Article 460 of Regulation (EU) No 575/2013, that are valued in accordance with that delegated regulation, and are not issued by the credit institution issuing the covered bonds itself, its parent undertaking, other than a public sector entity that is not a credit institution, its subsidiary or another subsidiary of its parent undertaking or by a securitisation special purpose entity with which the credit institution has close links;

(b)

short-term exposures to credit institutions that qualify for credit quality step 1 or 2, or short-term deposits to credit institutions that qualify for credit quality step 1, 2 or 3, in accordance with point (c) of Article 129(1) of Regulation (EU) No 575/2013.

Member States may restrict the types of liquid assets to be used for the purposes of points (a) and (b) of the first subparagraph.

Member States shall ensure that uncollateralised claims from exposures considered in default pursuant to Article 178 of Regulation (EU) No 575/2013 cannot contribute to the cover pool liquidity buffer.

4.Where credit institutions issuing covered bonds are subject to liquidity requirements set out in other Union legal acts that result in an overlap with the cover pool liquidity buffer, Member States may decide not to apply the provisions of national law transposing paragraphs 1, 2 and 3 for the period provided for in those Union legal acts. Member States may exercise that option only until the date on which an amendment to those Union legal acts to eliminate the overlap becomes applicable and shall inform the Commission and EBA where they exercise that option.

5.Member States may allow for the calculation of the principal for extendable maturity structures to be based on the final maturity date in accordance with the contractual terms and conditions of the covered bond.

6.Member States may provide that paragraph 1 does not apply to covered bonds that are subject to match funding requirements.

Article 17Conditions for extendable maturity structures

1.Member States may allow for the issue of covered bonds with extendable maturity structures where investor protection is ensured by at least the following:

(a)

the maturity can only be extended subject to objective triggers specified in national law, and not at the discretion of the credit institution issuing the covered bonds;

(b)

the maturity extension triggers are specified in the contractual terms and conditions of the covered bond;

(c)

the information provided to investors about the maturity structure is sufficient to enable them to determine the risk of the covered bond, and includes a detailed description of:

(i)

the maturity extension triggers;

(ii)

the consequences for a maturity extension of the insolvency or resolution of the credit institution issuing the covered bonds;

(iii)

the role of the competent authorities designated pursuant to Article 18(2) and, where relevant, of the special administrator with regard to the maturity extension;

(d)

the final maturity date of the covered bond is at all times determinable;

(e)

in the event of the insolvency or resolution of the credit institution issuing the covered bonds, maturity extensions do not affect the ranking of covered bond investors or invert the sequencing of the covered bond programme’s original maturity schedule;

(f)

the maturity extension does not change the structural features of the covered bonds regarding dual recourse as referred to in Article 4 and bankruptcy remoteness as referred to in Article 5.

2.Member States which allow the issue of covered bonds with extendable maturity structures shall notify EBA accordingly.

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