S.L. 345.27 Art. 12Coverage requirements.

(1) Credit institutions issuing covered bonds shall ensure that such covered bond programmes comply at all times with the coverage requirements laid down in this regulation and with any additional coverage requirements that may be established by the competent authority in Covered Bonds Rules.

(2) All liabilities of the covered bonds shall be covered by claims for payment attached to the cover assets. These liabilities 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 regulation 8; and

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

(3) 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 regulation 13; and

(d) claims for payment attached to derivative contracts held in accordance with regulation 8:

Provided that, uncollateralised claims where a default is considered to have occurred pursuant to Article 178 of the CRR shall not contribute to the coverage requirement.

(4) The competent authority shall, for the purposes of sub-regulation (2)(c) and sub-regulation (3)(d), issue Covered Bonds Rules on the valuation of derivative contracts.

(5) 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. The competent authority shall issue Covered Bonds 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.

(6) Credit institutions shall ensure that the calculation of cover assets and liabilities is based on the same methodology.