Latvian Covered Bonds - Latvia

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1 Who is the issuer? Universal credit institution

The cover assets of the CBs are segregated from the other assets of the credit institution issuing the bonds in a special purpose vehicle (SPV).
2 Does the bondholder have recourse to the issuer (in case of special issuer: recourse to the sponsor bank)? Direct
3 Who owns the cover assets? SPE which guarantees the bonds

As of alienation of asset, payments, claims, rights and assets received by issuer/alienor in relation to cover asset belong to a CBs company.
4 Is the issuer the originator of the cover assets? Yes, partly (external origination possible)

1 What type of assets may be included in the cover pool?
 
  Primary assets Substitution assets
Public sector assets Mortgage assets Other 1* Other 2* Other 3*  
Exposures to public sector entities x
Exposures to credit institutions x
Residential mortgage loans x
Commercial mortgage loans x
Ship loans x
Loans to housing association without mortgage x
Exposure to Private Participation in Infrastructure (PPI) or Private Finance Initiative (PFI) where public sector is conditional x
Exposures to multilateral development banks x


Other 1 is "maritime assets". Other than primary and substitution, these may be included: 1) issuer's loans to covered bond company for purchasing primary and substitution assets; 2) derivatives; 3) funds obtained from primary/substitution assets or derivatives; 4) collateral related to derivatives.
2 What is the geographical scope of assets?
 
  Primary assets Substitution assets
Public sector assets Mortgage assets Other 1* Other 2* Other 3*  
Domestic x x x x
Multilateral development banks x
EU x x x x
EEA x x x x


Other 1 is "Maritime assets".
3 Is there a maximum level for substitute assets in the statutory national framework? Yes, please specifiy

Indirect limitation – at least 85% of cover assets must be primary assets.
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
5 What is the frequency of reporting to investors? Quarterly

1 What is the basis for property valuation Market value
2 Is a regular update of the property value required? Yes, automated / indexed valuation sufficient
3 What are the LTV limits (single asset based)? Please specify in %/n.a. Residential
Commercial
Agricultural
Ships
Other assets
Additional limits on portfolio basis applicable?

Residential 70%; Commercial 60%; Agricultural N/A; Ships 60%; Other N/A
4 Are loans in excess of LTV limits eligible for inclusion in the cover pool? No (hard limit)

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? Yes
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? Nominal cover
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
3 What liquidity risk mitigation requirements are in place (interest)? 180 days liquidity provisions
Matching requirements
Stress testing requirements
4 What is the consequence of not fixing a breach of liquidity risk mitigants? Administrative penalty

The following sanctions are possible: 1) revocation of authorization for the covered bond programme; 2) public statement on violation; 3) warning; 4) monetary fine; 5) restrictions or complete recall from office for the officials.
5 If 180 days liquidity provisions are in place, what types of liquid assets are eligible LCR Level 1
LCR Level 2a
LCR Level 2b
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… Conditional pass-through
3 Which trigger plays a role for maturity extension according to law - independent or alone or in combination? Issuer bankruptcy/resolution
Other

Extension may be applied if CB programme so foresees. 2 conditions must be present: issuer’s insolvency or liquidation and circumstances credibly showing that issuer will not be able to make payments to investors.
4 Does any competent authority need to give its okay (or non-opposition)? Yes

Special admin (appointed in situations such as issuer insolvency) has the right to use extendable maturity structure if legal conditions are met.

IV.5 Overcollateralisation

1 Is mandatory overcollateralisation required in the law ?

The claims resulting from the loans included in the cover assets and the value of the derivative. - 105% - The total outstanding nominal value of the covered bonds.

Covered bonds where the cover assets are claims resulting from loans for companies controlled by public persons or guarantees by such companies. - 110% - The total outstanding nominal value of the covered bonds.


Percentage figure: "No less than ...%" Cover bond programme may foresee more strict overcollateralisation requirements.

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?

The Financial and Capital Market Commission - Website

2 Is a special permission required for a covered bond programme according to national law? Yes, licence for institution
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. Yes

Further comments in Comments Section at the end of the questionnaire.
3 Does the statutory law allow covered bonds out of the scope of Art 129 of CRR? In this case, please specify the collateral No
4 Are listed covered bonds eligible in repo transactions with the national central bank? No

Not specified in the law.

Primary Legislation

Hypostat

Fact Book

Intro CB Video

Any further comments/information? Comments on VI.2:
"Primary assets shall only include assets of the following classes:
1) the public sector assets - the exposures referred to in Article 129(1)(a) and Article 129(1)(b) of Regulation No 575/2013;
2) the residential mortgage assets - loans (credits) secured by residential real estate, as defined in Article 129(1)(d) of Regulation No 575/2013;
3) the commercial mortgage assets - loans (credits) secured by commercial real estate, as defined in Article 129(1)(f) of Regulation No 575/2013;
4) maritime assets - loans (credits) secured by a ship mortgage, as defined in Article 129(1)(g) of Regulation No 575/2013;
5) the assets which are loans to capital companies controlled by a public person or in cases where the law allows such capital companies to issue loans (credits) or to provide guarantees themselves - loans (credits) guaranteed by such capital companies in conformity with the provisions of Section 55, Paragraph six.

Substitution assets shall include exposures that conform to the requirements of Article 129(1)(c) and (1)(a)(a), (b), (c), and (d) of Regulation No 575/2013."