Dutch registered CBs programmes - Netherlands

1 Who is the issuer? Universal credit institution
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

The legal ownership of the assets is transferred to the SPE (Covered Bond Company).
4 Is the issuer the originator of the cover assets? Yes, solely

The issuer or group entitities of the issuer.

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
Exposures to credit institutions which are members of a system of mutual guarantee x
Exposures to multilateral development banks x


Legislation requires that at least 80% of the cover pool shall consist of one type of the primary cover assets.
2 What is the geographical scope of assets?
 
  Primary assets Substitution assets
Public sector assets Mortgage assets Other 1* Other 2* Other 3*  
EEA x x


In practice every programme solely uses Dutch residential mortgages as primary cover assets.
3 Is there a maximum level for substitute assets in the statutory national framework? Yes, please specifiy

20% of the cover 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? Monthly

The law requires quarterly reporting but in practice banks report on a monthly basis.

1 What is the basis for property valuation Market value

Also, "Mortgage lending value". Both market value and mortgage lending value can be used but in practice, the value of Dutch property is based on the market value.
2 Is a regular update of the property value required? Yes, automated / indexed valuation sufficient

Property values are indexed monthly. In general, house price decreases are fully taken into account whilst increases are only partially included.
3 What are the LTV limits (single asset based)? Please specify in %/n.a. Residential
Commercial
Ships

Residential 80%. Commercial 60%. Ships 60%. No additional limits on portfolio basis applicable. There is the possibility for the LTV ratio to rise to 70% for commercial mortgage loans.
4 Are loans in excess of LTV limits eligible for inclusion in the cover pool? Yes (soft limit)

Any difference between the actual (higher) LTV and the 80% maximum will serve as additional credit enhancement.

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

An increasing number of programs/pools use 'natural' hedging although there are still programs/pools that make use of derivatives.
2 Are there mitigating provisions for interest rate risk? Yes, by legislation/regulation

Derivatives and/or 'natural' hedging can be used.
3 Are there mitigating provisions for foreign exchange risk? Yes, by legislation/regulation

Derivatives can be used.
4 Are there mitigating provisions for maturity mismatch risk? Yes, by legislation/regulation

Also, "Other". Issuers have issued long(er)-dated, fixed-rate covered bonds to match maturity/interest rate profile of the assets.
5 What type of coverage test is applied? Nominal cover
6 Are there stress scenarios applied? No

IV.3 Liquidity risk

1 Is exposure to liquidity risk mitigated? Yes, both by law and contractual
2 What liquidity risk mitigation requirements are in place (principal)? 180 days liquidity provisions
Maturity extension provisions
Contractual pre-maturity test
3 What liquidity risk mitigation requirements are in place (interest)? 180 days liquidity provisions
Maturity extension provisions
4 What is the consequence of not fixing a breach of liquidity risk mitigants? No new covered bond issuance
Administrative penalty
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

Maturity extension is not possible at discretion of the issuer.
2 Is it possible to issue… Hard bullet
Soft bullet
Conditional pass-through
3 Which trigger plays a role for maturity extension according to law - independent or alone or in combination? Issuer bankruptcy/resolution
Issuer failure to pay
4 Does any competent authority need to give its okay (or non-opposition)? No

When issuing a program that allows for maturity extension the central bank needs to approve this program, if and when the maturity extension takes place there is no approval required from the central bank although they must be informed in advance.

IV.5 Overcollateralisation

1 Is mandatory overcollateralisation required in the law ?

All types - 5% - Nominal


Nominal, but taking CRR LTV cut-off limits into account.

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

The Dutch covered bond law allows for the appointment of an external or an internal cover pool monitor.
2 Is the CPM separate from the issuing credit institution? No, internal CPM allowed in line with the provisions of Article 13(3) but independent

The internal CPM is independent from the credit decision process, but can be the same accountant as the external accountant of the bank.
3 Is the appointment, dismissal, eligibility criteria and the role of the CPM regulated by the national statutory law? Yes

By Article 40n of the Implementation Decree Covered Bonds.

V.2 Banking supervision

1 Which are the national competent authorities designated to carry out covered bonds public supervision in the law?

De Nederlandsche Bank - Website


Link to register old law (https://www.dnb.nl/en/public-register/register-of-covered-bonds/?p=1&l=10&rc=V0ZUR08)
2 Is a special permission required for a covered bond programme according to national law? Yes, licence for institution

Bank needs to obtain permission from the Dutch central bank to issue covered bonds.
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])? No

Member state option of CBD Article 20(2) and (3) was not used. Management of the cover pool is the task of the directors of an independent Trustee (appointed at the inception of the program).
5 Which is the typical frequency in the national statutory law of reporting from the covered bond issuers to the designated competent authorities? Quarterly

Quarterly: asset coverage and liquidity coverage. Other: at the start and upon request thereafter. Information asset coverage and liquidity coverage requirements have to be provided at the start and quarterly thereafter, other information at the start and upon request thereafter.

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

The collateral types meeting the Art. 129 CRR requirements are those specified in paragraphs 1(a)-(g) of Art. 129 CRR.
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? Yes

Eligible as collateral with the ECB.

Any further comments/information?