Covered bonds in Denmark: Main contents in current legislation

1
Covered bonds in Denmark Main contents in
current legislation

• August 2007
• The Association of Danish Mortgage Banks

2
Issuers of bonds secured by real property
3
Differences between SDO, SDRO and RO (1)
1) CRD Directive 2006/48/EC definition of
covered bonds 2) Does not comply with CRD demand
for continuously compliance with LTV requirements
3) Mortgage bonds issued before 1 January 2008
will maintain the low risk weight of 0.1 percent
in the entire duration of the bonds. 4)
Commercial banks are also allowed to apply ships
mortgages.
4
Differences between SDO, SDRO and RO (2)
1) Technically not covered bonds. Risk weight in
the standardised method in Directive 2006/48/EC
is 20 per cent. 2) As of 1 July 2009
5
Maximum lending limits
Without additional collateral the LTV-limit is
60 per cent.
6
Balance principle (1)
1) Issuer may after 1 July 2007 choose between
compliance of specific or general balance
principle 2) There have been laid down different
loss limits for mortgage banks, commercial bank
and a ship financing institution
7
Balance principle (2)
8
Liability conditions in case of insolvency of a
mortgage bank

• SDO/SDRO/RO-investor demand
• Assets in capital centre including legally
  determined excess cover
• Voluntarily additional excess cover
• Preferential claim against the ordinary assets
  available for distribution
• Derivative counterparties demands
• Rank pari passu with bondholders in capital
  centres
• Junior Covered Bonds investor demand
• Secondary secured claims against the funds of a
  capital centre and an unsecured claim against the
  ordinary assets available for distribution