S.L. 345.27 Art. 8Derivative contracts in the cover pool.

(1) Derivative contracts may only be included in the cover pool where the following requirements are met:

(a) the derivative contracts are included in the cover pool exclusively for risk hedging purposes, their volume is adjusted in the case of a reduction in the hedged risk and they are removed when the hedged risk ceases to exist;

(b) the derivative contracts are sufficiently documented;

(c) the derivative contracts are segregated in accordance with regulation 9;

(d) the derivative contracts cannot be terminated upon the insolvency or resolution of the credit institution that issued the covered bonds;

(e) the derivative contracts comply with the Covered Bonds Rules issued in terms of sub-regulation (2):

Provided that, the competent authority may, for the purposes of ensuring investor protection, issue Covered Bonds Rules to establish additional requirements that need to be met in order for derivative contracts to be included in the cover pool.

(2) For the purposes of ensuring compliance with the requirements listed in sub-regulation (1) or any other additional requirements as may be established by the competent authority in Covered Bonds Rules, the competent authority shall issue Covered Bonds Rules for derivative contracts in the cover pool, which shall specify:

(a) the eligibility criteria for the hedging counterparties;

(b) the necessary documentation to be provided in relation to derivative contracts.