PART THREE

CAPITAL REQUIREMENTS
TITLE II

CAPITAL REQUIREMENTS FOR CREDIT RISK
CHAPTER 2

Standardised approach
Section 2

Risk weights

Exposures in the form of covered bonds
Article 129
1
To be eligible for the preferential treatment set out in paragraphs 4 and 5,
CRR covered bonds
shall meet the requirements set out in paragraph 7 and shall be collateralised by any of the following eligible assets:
a
exposures to or guaranteed by—
i
the central government of the United Kingdom;
ii
the Bank;
iii
a regional government of the United Kingdom; or
iv
a public sector entity or local authority in the United Kingdom;
b
exposures to or guaranteed by third country central governments, third-country central banks, multilateral development banks, international organisations that qualify for the credit quality step 1 as set out in this Chapter, and exposures to or guaranteed by third-country public sector entities, third-country regional governments or third-country local authorities that are risk weighted as exposures to institutions or central governments and central banks in accordance with Article 115(1) or (2), or Article 116(1), (2) or (4) respectively and that qualify for the credit quality step 1 as set out in this Chapter, and exposures within the meaning of this point that qualify as a minimum for the credit quality step 2 as set out in this Chapter, provided that they do not exceed 20 % of the nominal amount of outstanding covered bonds of the issuing institutions;
c
exposures to institutions that qualify for the credit quality step 1 as set out in this Chapter. The total exposure of this kind shall not exceed 15 % of the nominal amount of outstanding covered bonds of the issuing institution. Exposures to institutions in the
United Kingdom
with a maturity not exceeding 100 days shall not be comprised by the step 1 requirement but those institutions shall as a minimum qualify for credit quality step 2 as set out in this Chapter;
d
loans secured by:
1. residential property up to the lesser of the principal amount of the liens that are combined with any prior liens and 80 % of the value of the pledged properties; ...
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
f
loans secured by:
1. commercial immovable property up to the lesser of the principal amount of the liens that are combined with any prior liens and 60 % of the value of the pledged properties; ...
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans secured by commercial immovable property are eligible where the loan to value ratio of 60 % is exceeded up to a maximum level of 70 % if the value of the total assets pledged as collateral for the covered bonds exceed the nominal amount outstanding on the covered bond by at least 10 %, and the bondholders' claim meets the legal certainty requirements set out in Chapter 4. The bondholders' claim shall take priority over all other claims on the collateral;
g
loans secured by maritime liens on ships up to the difference between 60 % of the value of the pledged ship and the value of any prior maritime liens.
For the purposes of
point (c)
of the first subparagraph, exposures caused by transmission and management of payments of the obligors of, or liquidation proceeds in respect of, loans secured by pledged properties of the senior units or debt securities shall not be comprised in calculating the limits referred to in those points.
The competent authorities may
... partly waive the application of point (c) of the first subparagraph and allow credit quality step 2 for up to 10 % of the total exposure of the nominal amount of outstanding covered bonds of the issuing institution, provided that significant potential concentration problems in the
United Kingdom
can be documented due to the application of the credit quality step 1 requirement referred to in that point.
2
The situations referred to in points (a) to (f) of paragraph 1 shall also include collateral that is exclusively restricted by legislation to the protection of the bond-holders against losses.
3
Institutions shall for immovable property collateralising
CRR covered bonds
meet the requirements set out in Article 208 and the valuation rules set out in Article 229(1).
4
CRR covered bonds
for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight in accordance with Table 6a which corresponds to the credit assessment of the ECAI in accordance with Article 136.

Table 6a
Credit quality step | 1 | 2 | 3 | 4 | 5 | 6
Risk weight | 10 % | 20 % | 20 % | 50 % | 50 % | 100 %
5
CRR covered bonds
for which a credit assessment by a nominated ECAI is not available shall be assigned a risk weight on the basis of the risk weight assigned to senior unsecured exposures to the institution which issues them. The following correspondence between risk weights shall apply:
a
if the exposures to the institution are assigned a risk weight of 20 %, the
CRR covered bonds
shall be assigned a risk weight of 10 %;
b
if the exposures to the institution are assigned a risk weight of 50 %, the
CRR covered bonds
shall be assigned a risk weight of 20 %;
c
if the exposures to the institution are assigned a risk weight of 100 %, the
CRR covered bonds
shall be assigned a risk weight of 50 %;
d
if the exposures to the institution are assigned a risk weight of 150 %, the
CRR covered bonds
shall be assigned a risk weight of 100 %.
6
CRR covered bonds
issued before 31 December 2007 are not subject to the requirements of paragraphs 1 and 3. They are eligible for the preferential treatment under paragraphs 4 and 5 until their maturity.
7
Exposures in the form of
CRR covered bonds
are eligible for preferential treatment, provided that the institution investing in the
CRR covered bonds
can demonstrate to the competent authorities that:
a
it receives portfolio information at least on:
1. the value of the cover pool and outstanding
CRR covered bonds
;
2. the geographical distribution and type of cover assets, loan size, interest rate and currency risks;
3. the maturity structure of cover assets and
CRR covered bonds
; and
4. the percentage of loans more than 90 days past due;
b
the issuer makes the information referred to in point (a) available to the institution at least semi-annually.
Substituted by Corrigendum to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).
Words in Art. 129(1) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 123(2)(a) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 129(1) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 123(2)(g) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 129(1) omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 123(2)(h)(i) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 129(1) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 123(2)(h)(ii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Art. 129(1)(a) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 123(2)(b) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 129(1)(c) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 123(2)(c) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Art. 129(1)(d)(ii) and word omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 123(2)(d) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Art. 129(1)(e) omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 123(2)(e) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Art. 129(1)(f)(ii) and word omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 123(2)(f) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 129(5) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 123(4) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 129(3)-(7) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 123(3) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)