Belgian Covered Bonds - Belgium

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1 Who is the issuer? Universal credit institution with a special licence

A universal credit institution needs to obtain a general and a specific license for the issuance of Belgian covered bonds.
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? The issuer directly
4 Is the issuer the originator of the cover assets? Yes, partly (external origination possible)

External origination is possible if the conditions in art 4 of Annex III of the Banking Law are met.

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
Derivatives x
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
OECD x x
3 Is there a maximum level for substitute assets in the statutory national framework? Yes, please specifiy

15% for credit quality step 1 and 2; 10% for credit quality step 2
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

1 What is the basis for property valuation Market value
2 Is a regular update of the property value required? Yes, new external physical apraisal within a specific time span
Yes, automated / indexed valuation sufficient
3 What are the LTV limits (single asset based)? Please specify in %/n.a. Residential
Commercial

Residential 80%; Commercial 60%. Value of a receivable is capped by the Value of Cover Asset mechanism.
4 Are loans in excess of LTV limits eligible for inclusion in the cover pool? Yes (soft limit)

Value of a receivable is capped by the Value of Cover Asset mechanism.

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
2 Are there mitigating provisions for interest rate risk? Yes, by legislation/regulation

The issuer needs to report to the regulator on a quarterly basis on the results of interest rate risk stress tests
3 Are there mitigating provisions for foreign exchange risk? Yes, by legislation/regulation

The issuer needs to report to the regulator on a quarterly basis on the results of foreign exchange risk stress tests (if applicable)
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

IV.3 Liquidity risk

1 Is exposure to liquidity risk mitigated? Yes, by law
2 What liquidity risk mitigation requirements are in place (principal)? Maturity extension provisions
Stress testing requirements
3 What liquidity risk mitigation requirements are in place (interest)? 180 days liquidity provisions
Stress testing requirements
4 What is the consequence of not fixing a breach of liquidity risk mitigants? Other, please specify

Potential loss of covered bond license
5 If 180 days liquidity provisions are in place, what types of liquid assets are eligible LCR Level 1
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)
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… 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
Issuer failure to pay
4 Does any competent authority need to give its okay (or non-opposition)? No

But the reasons for applying the extenstion need to be documented (ex-post) to the regulator

IV.5 Overcollateralisation

1 Is mandatory overcollateralisation required in the law ?

Covered Bond Type - 105% - on a Value of Cover Asset basis

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?

National Bank of Belgium - Website - National list

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

The NBB retains the right to impose an issuer-specific issuance limit on covered bonds to protect the other creditors of the issuer.
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
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

Primary Legislation

Secondary Legislation

European Covered Bond Label (Premium) list

Hypostat

Fact Book

Any further comments/information?