Norwegian Covered Bonds - Norway

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 x Exposures to credit institutions x Residential mortgage loans x Commercial mortgage loans x Loans to housing association without mortgage x Exposures to multilateral development banks x Derivatives x The Norwegian covered bond legislation states that for OMF premium the assets in the cover pool will have to comply with the requirements in art. 129 CRR.
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 x EU x x x x EEA x x x x OECD x x G10 x Derivatives x
3	Is there a maximum level for substitute assets in the statutory national framework?	Yes, please specifiy Primary assets must represent the main portion of the cover pool. Subsitutions assets shall consist of the liquidity buffer, other eligible assets or derivative contracts.
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 The property values are monitored quarterly using advanced statistical models
3	What are the LTV limits (single asset based)? Please specify in %/n.a.	Residential Commercial Other assets Residential 80%. Commercial 60%. 60% for leisure property mortgages. It is possible as per the art. 129 (CRR) to increase LTV for commercial to 70%, subject to increased OC requirements
4	Are loans in excess of LTV limits eligible for inclusion in the cover pool?	Hard limit upon inclusion but soft limit accepted following inclusion It is not required to remove the loan from the cover pool once included. When testing OC, only the part of the loan up to LTV-limit, is eligible.

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?	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?	No
5	What type of coverage test is applied?	Nominal cover
6	Are there stress scenarios applied?	Yes, by law Yes by law and other. Stress tests are required to test the value cover and the liquidity risk as well as interest rate changes. Issuers also typically stress test for instance declining house prices.

IV.3 Liquidity risk

1	Is exposure to liquidity risk mitigated?	Yes, both by law and contractual Norwegian covered bonds issued pre 8 July 2022 normally have contractual soft bullet terms. CVBs issued under the new legislation post 8 July have objective triggers based on law.
2	What liquidity risk mitigation requirements are in place (principal)?	180 days liquidity provisions Maturity extension provisions Norwegian covered bonds issued pre 8 July 2022 normally have contractual soft bullet terms. CVBs issued under the new legislation post 8 July have objective triggers based on law.
3	What liquidity risk mitigation requirements are in place (interest)?	180 days liquidity provisions
4	What is the consequence of not fixing a breach of liquidity risk mitigants?	Administrative penalty Other, please specify Breach must be notified to the FSA as well as a plan for fulfilling requirements. FSA has the option to impose sanctions.
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 based on predefined triggers (specified in the legislation) and FSA approval.
2	Is it possible to issue…	Hard bullet Soft bullet
3	Which trigger plays a role for maturity extension according to law - independent or alone or in combination?	Issuer bankruptcy/resolution Other The Issuer is likely to fail in the near future and there is no reasonable prospect that any alternative measures can prevent the issuer from failing.
4	Does any competent authority need to give its okay (or non-opposition)?	Yes Approval by the FSA.

IV.5 Overcollateralisation

1

Is mandatory overcollateralisation required in the law ?

Mortgage or commercial real estate - 5% - Nominal Public sector - 2% - 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?	Finanstilsynet (Financial Supervisory Authority) - Website - National list
2	Is a special permission required for a covered bond programme according to national law?	Yes, licence for institution + competent autority The FSA has published a list of all issuers who has gotten the approval to issue covered bonds under the new legislation. Link (Norwegian only): https://www.finanstilsynet.no/nyhetsarkiv/nyheter/2022/oversikt-over-omf-foretak-som-kan-utstede-omf-premium/
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 The Norwegian covered bond legislation states that for OMF premium the assets in the cover pool will have to comply with the requirements in art. 129 CRR (direct reference)
3	Does the statutory law allow covered bonds out of the scope of Art 129 of CRR? In this case, please specify the collateral	Yes The collateral for "OMF standard" is not specified, just the requirements related to what needs to be fulfilled for a given asset
4	Are listed covered bonds eligible in repo transactions with the national central bank?	Yes

Primary Legislation

• Forskrift om finansforetak og finanskonsern (finansforetaksforskriften) (NO).pdf (Original language)
• Lov om finansforetak og finanskonsern (finansforetaksloven) (NO).pdf (Original language)

Hypostat

• Norway.pdf (English language)

Fact Book

• 3.29 Norway.pdf (English language)

Intro CB Video

Any further comments/information?

Note important information: This questionnaire is based on the current market practice in Norway. For instance, issuers have so far only applied for approval for European Covered Bonds (Premium), "OMF Premium" in Norwegian. If market practice changes, this questionnaire will be updated to reflect the new situation.