Regulation 17 General requirements

United Kingdom

(1)

An issuer of a regulated covered bond must enter into arrangements with the owner of the relevant asset pool for the maintenance and administration of that pool.

(2)

The arrangements must provide for the following requirements—

(a)

a record is kept of each asset in the asset pool;

(b)

the asset pool is, during the whole period of validity of the regulated covered bond, capable of covering—

(i)

claims attaching to the bond; and

(ii)

sums required for the maintenance, administration and winding up of the asset pool;

(c)

there is timely payment of claims attaching to the bond to the regulated covered bond holder; F1...

(d)

the asset pool is of sufficient quality to give investors confidence that in the event of the failure of the issuer there will be a low risk of default in the timely payment by the owner of claims attaching to the bond;

F2(e)

the eligible property in the asset pool of a single asset class bond consists only of eligible property of the same class as the eligible property included in the asset pool of the regulated covered bond when it was registered;

(g)

the total amount of interest payable in the period of twelve months following any given date in respect of eligible property in the asset pool is not less than the interest which would be payable in relation to the regulated covered bonds issued under the programme in that period, assuming that the reference rates applicable on the given date do not change in that period.

(f)

the total principal amounts outstanding in respect of eligible property in the asset pool is more than 108% of the total principal amounts outstanding in relation to the bonds to which the asset pool relates; and

F3(2A)

In determining whether the requirement in subparagraph (e) of paragraph (2) is satisfied, no account shall be taken of eligible property which is liquid assets.

(2B)

Subject to paragraph (2C), in determining whether the requirement in subparagraph (f) of paragraph (2) is satisfied, the total principal amounts outstanding in respect of eligible property which is liquid assets shall not exceed an amount which is the sum of—

(a)

8% of the total principal amounts outstanding in relation to bonds with a maturity of one year or more, and

(b)

100% of the total principal amounts outstanding in relation to bonds with a maturity of less than one year.

(2C)

In applying paragraph (2B) in relation to the asset pool of a single asset class bond which is comprised only of assets within class 1 as specified in regulation 2(1A)(a), no account shall be taken of eligible property which is within paragraph (a) of the definition of “liquid assets” in regulation 1(2).

(2D)

In ensuring that the arrangements satisfy the requirements in subparagraphs (f) and (g) of paragraph (2), the issuer may take account of any hedging agreements which it has entered into in relation to the assets in the asset pool and the regulated covered bonds.

(2E)

Nothing in this regulation shall prevent the Authority directing an issuer to observe additional requirements in relation to its asset pool.

(3)

This regulation does not apply in the event of the insolvency of the issuer.

Annotations

Textual amendments

F1: Word in reg. 17(2)(c) omitted (1.1.2013) by virtue of The Regulated Covered Bonds (Amendment) Regulations 2011 (S.I. 2011/2859), regs. 1, 2(9)(a)
F2: Reg. 17(2)(e)-(g) inserted (1.1.2013) by The Regulated Covered Bonds (Amendment) Regulations 2011 (S.I. 2011/2859), regs. 1, 2(9)(b)
F3: Reg. 17(2A)-(2C) inserted (1.1.2013) by The Regulated Covered Bonds (Amendment) Regulations 2011 (S.I. 2011/2859), regs. 1, 2(9)(c) (as amended (1.1.2013) by The Regulated Covered Bonds (Amendment) Regulations 2012 (S.I. 2012/2977), regs. 1(1), 2(3))