Estonian Covered Bonds - Estonia
|1||Who is the issuer?||
Universal credit institution with a special licence
The company wishing to issue covered bonds must hold the authorisation of credit institution and an additional authorisation to issue covered bonds.
|2||Does the bondholder have recourse to the issuer (in case of special issuer: recourse to the sponsor bank)?||
The terms of covered bonds must not restrict the holder's right of recourse.
|3||Who owns the cover assets?||The issuer directly|
|4||Is the issuer the originator of the cover assets?||
Yes, partly (external origination possible)
Primary cover assets may only be the issuer's claims, subtitute collateral may also include other cover assets.
|1||What type of assets may be included in the cover pool?|
Other1 is "mixed assets". The types of covered bonds under Estonian law are (i) mortgage covered bond; and (ii) the mixed asset covered bond.
|2||What is the geographical scope of assets?|
Claims arising from a mortgage credit granted to a natural person against residential property situated in territory of another EEA country may only be used if mortgage provides creditor with protection equivalent to protection provided by a mortgage established under Estonian legislation.
|3||Is there a maximum level for substitute assets in the statutory national framework?||
Yes, please specifiy
Depending on an asset, 12-20%. Maximum per centage of the nominal value of the outstanding covered bonds in the covered bond portfolio that they cover
|4||Are there any reporting requirements for covered bond issuers to investors?||
Yes, by law and in line with art. 14 of EU Covered Bond Directive
Quarterly disclose obligation about covered bond portfolios.
|5||What is the frequency of reporting to investors?||Quarterly|
|1||What is the basis for property valuation||
The market value of the property standing as security for the credit shall be valuated by a valuator.
|2||Is a regular update of the property value required?||
Yes, new external physical apraisal within a specific time span
Property value must be reviewed at least once a year and revaluated, if necessary.
|3||What are the LTV limits (single asset based)? Please specify in %/n.a.||
Residential 70%; Commercial 60%; Housing construction credit 60%.
|4||Are loans in excess of LTV limits eligible for inclusion in the cover pool?||
Yes (soft limit)
So called relative LTV, which determines how much of the amount of credit may be taken as a collateral.
IV.1 Derivative contracts in the cover pool
|1||Are derivative contracts eligible for the inclusion in the cover pool?||Yes, exclusively for hedging purposes (by law)|
|2||Are there requirements for derivative contracts (e.g. eligibility criteria for hedging counterparties)?||Yes, specified in law|
|3||Will derivative contracts remain in case of insolvency of the issuer?||
After sepration, counterparties' claims to the derivative instruments in the register are satisfied on the pool account, proceeds to be then received.
|4||If derivatives are permitted in the cover pool, what is their ranking?||Pari passu to covered bond holders|
IV.2 Exposure to market risk
|1||What is the primary method for the mitigation of market risk?||
Natural' matching (i.e. match funding, matching without the use of off-balance sheet instruments) and stress testing
Use of derivative hedging instruments
|2||Are there mitigating provisions for interest rate risk?||Yes, by legislation/regulation|
|3||Are there mitigating provisions for foreign exchange risk?||Yes, by legislation/regulation|
|4||Are there mitigating provisions for maturity mismatch risk?||Yes, by legislation/regulation|
|5||What type of coverage test is applied?|
|6||Are there stress scenarios applied?||Yes, by law|
IV.3 Liquidity risk
|1||Is exposure to liquidity risk mitigated?||Yes, by law|
|2||What liquidity risk mitigation requirements are in place (principal)?||
180 days liquidity provisions
Maturity extension provisions
Stress testing requirements
Regarding matching requirements, cover pool administrator has an obligation to actively carry out asset-liability matching.
|3||What liquidity risk mitigation requirements are in place (interest)?||
180 days liquidity provisions
Maturity extension provisions
Stress testing requirements
|4||What is the consequence of not fixing a breach of liquidity risk mitigants?||
Other, please specify
Other: The additional authorisation can be revocated e.g. If the issuer has repeatedly or materially violated the provisions of Covered Bonds Act.
|5||If 180 days liquidity provisions are in place, what types of liquid assets are eligible||
LCR Level 1
LCR Level 2a
Short term exposures to credit institutions (Credit Quality Step (CQS) 1)
Short term exposures to credit institutions (CQS 2)
Short term deposits to credit institutions (CQS 1)
Short term deposits to credit institutions (CQS 2)
Short term deposits to credit institutions (CQS 3)
|6||If 180 days liquidity provisions are in place, the calculation of principal is based on:||The (extended) legal final maturity date|
IV.4. Maturity extension
|1||Is maturity extension allowed by national law?||Yes, but optional and subject to conditions|
|2||Is it possible to issue…||
|3||Which trigger plays a role for maturity extension according to law - independent or alone or in combination?||Separation of cb portfolio for many reasons could be used as trigger(incl. bankruptcy, moratorium, expiration of authorisation, issuer dissolution,..)|
|4||Does any competent authority need to give its okay (or non-opposition)?||No|
|1||Is mandatory overcollateralisation required in the law ?||
Mortgage / mixed - 5% - nominal
V.1 Cover pool monitor (CPM)
|1||Is there a cover pool monitor in addition to national competent authorities in the statutory law?||Yes, by law and in line with Article 13 of EU Covered Bond Directive|
|2||Is the CPM separate from the issuing credit institution?||Yes, required by national statutory law|
|3||Is the appointment, dismissal, eligibility criteria and the role of the CPM regulated by the national statutory law?||Yes|
V.2 Banking supervision
|1||Which are the national competent authorities designated to carry out covered bonds public supervision in the law?||
Estonian Financial Supervision and Resolution Authority - Website
|2||Is a special permission required for a covered bond programme according to national law?||
Yes, licence for institution + competent autority
If issuer want, after authorisation, to issue CBs with basis a programme other than one in business plan, shall submit application to the Financial Supervision Authority
|3||Is there a covered bond issuance limit in law or regulation? If yes, please specify||No|
|4||Does the national statutory law provide for the appointment of a dedicated cover pool administrator in case of insolvency/resolution (transfer included acc. to BRRD [Bank Recovery and Resolution Directive])?||Yes|
|5||Which is the typical frequency in the national statutory law of reporting from the covered bond issuers to the designated competent authorities?||Quarterly|
|1||Does the national statutory law meet the requirements laid down in the EU Covered Bond Directive?||Yes|
|2||Does the statutory law meet the requirements of Article 129 of CRR [Capital Requirement Regulation]? In this case, please specify the collateral types meeting the Art. 129 CRR.||
Please, see comments section below
|3||Does the statutory law allow covered bonds out of the scope of Art 129 of CRR? In this case, please specify the collateral||
Net claims arising from derivative instruments, if do not exceed 15% of nominal value of outstanding CBs in the cb portfolio that they cover.
|4||Are listed covered bonds eligible in repo transactions with the national central bank?||Yes|
- Estonian Covered Bonds Act (EST).pdf (Original language)
- Estonian Covered Bonds Act (ENG).pdf (English language)
- Regulation on the content of the supervision reports related to covered bonds, the basis for their preparation and the procedure for submission (EST).pdf (Original language)
- Regulation on composition of data to be entered in the cover register of covered bond (EST).pdf (Original language)
European Covered Bond Label (Premium) list
|Any further comments/information?||
Further comments on section VI.2:
- claims on or guaranteed by central banks within the European System of Central Banks, and central governments, public sector entities, regional governments or local authorities of EU Member States.
- claims on or guaranteed by third-country central governments and central banks, multilateral development banks and international organisations that qualify for credit quality step 1 in accordance with CRR.
- claims on or guaranteed by third-country public sector entities, regional governments and local authorities, for which a risk weight has been assigned the same way as for claims on credit institutions and investment firms or central governments and central banks in accordance with CRR and which qualify for the credit quality step 1 according to the risk weight so assigned.
- claims specified in the two rows above, which qualify as a minimum for the credit quality step 2 in accordance with CRR, provided that they do not exceed 20% of the nominal value of the outstanding covered bonds in the covered bond portfolio that they cover.
- claims on credit institutions and investment firms, which qualify for the credit quality step 1 in accordance with CRR, provided that they do not exceed 15% of the nominal value of the outstanding covered bonds in the covered bond portfolio that they cover.
- claims on credit institutions and investment firms, which qualify for credit quality step 2 in accordance with CRR, provided that they do not exceed 10% of the nominal value of the outstanding covered bonds in the covered bond portfolio that they cover.
- claims on credit institutions and investment firms in the EU with a term to maturity not exceeding 100 days, which qualify as a minimum for credit quality step 3 in accordance with CRR, provided that they do not exceed 8% of the nominal value of the outstanding covered bonds in the covered bond portfolio that they cover.