Contractual Law Based Covered Bonds - Switzerland

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 credit institutions x Residential mortgage loans x
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
3	Is there a maximum level for substitute assets in the statutory national framework?	Yes, please specifiy 15% - Contractual obligations
4	Are there any reporting requirements for covered bond issuers to investors?	Yes, contractual obligations
5	What is the frequency of reporting to investors?	Monthly

1	What is the basis for property valuation	Market value Market value based on latest valuation
2	Is a regular update of the property value required?	Yes, new external physical apraisal within a specific time span but in general done by the client advisor after inspecting the property and confirmed using a third party valuation model (IAZI)
3	What are the LTV limits (single asset based)? Please specify in %/n.a.	Residential Residential 80%
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

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 (contractual obligations)
2	Are there requirements for derivative contracts (e.g. eligibility criteria for hedging counterparties)?	Yes, by contract The use of derivative hedge instrumtents is allowed under the programme but has not been used until yet.
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?	Other “Natural” hedging combined with overcollateralisation
2	Are there mitigating provisions for interest rate risk?	Other Overcollateralisation
3	Are there mitigating provisions for foreign exchange risk?	Other The use of derivative instruments is allowed under the programme but has not been used until yet, since no foreign exchange risk
4	Are there mitigating provisions for maturity mismatch risk?	Other Overcollateralisation
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, contractual obligations
2	What liquidity risk mitigation requirements are in place (principal)?	Maturity extension provisions
3	What liquidity risk mitigation requirements are in place (interest)?	Reserve fund requirements Liquidity funding requirements after the occurance of a liquidity reserve event
4	What is the consequence of not fixing a breach of liquidity risk mitigants?	No new covered bond issuance Event of default The breach will trigger an issuer event of default
5	If 180 days liquidity provisions are in place, what types of liquid assets are eligible
6	If 180 days liquidity provisions are in place, the calculation of principal is based on:

IV.4. Maturity extension

1	Is maturity extension allowed by national law?	Yes, required Required by contractual provision if non-discretionary conditions have been met
2	Is it possible to issue…	Soft bullet
3	Which trigger plays a role for maturity extension according to law - independent or alone or in combination?	Other Issuer event of default and lack of liquidity
4	Does any competent authority need to give its okay (or non-opposition)?	No

IV.5 Overcollateralisation

1

Is mandatory overcollateralisation required in the law ?

No, but contractual obligation and/or by rating agencies

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 Required by contractual provisions
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
3	Is the appointment, dismissal, eligibility criteria and the role of the CPM regulated by the national statutory law?	No

V.2 Banking supervision

1	Which are the national competent authorities designated to carry out covered bonds public supervision in the law?	No dedicated covered bond law for single issuer in Switzerland
2	Is a special permission required for a covered bond programme according to national law?	No
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
5	Which is the typical frequency in the national statutory law of reporting from the covered bond issuers to the designated competent authorities?	None

1	Does the national statutory law meet the requirements laid down in the EU Covered Bond Directive?	No No dedicated covered bond law for single issuer in Switzerland
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.	No
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 Contractual obligations
4	Are listed covered bonds eligible in repo transactions with the national central bank?	No

Hypostat

• Switzerland.pdf (English language)

Fact Book

• 3.41.2 Switzerland - Contractual Law Based Covered Bonds.pdf (English language)

Any further comments/information?

The answers to this questionnaire are based on the contractual Valiant covered bond programme 1. The base prospectus is available under: https://www.valiant.ch/ueber-valiant/investor-relations-fremdkapital-coveredbonds