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Any residential real estate loans underlying the structured covered bank bonds must be denominated in euro; the issuer (and the debtor and guarantor, if they are legal persons) must be incorporated in a Member State, their underlying assets must be located in a Member State, and the law governing the loan must be that of a Member State.

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Residential real estate loans are eligible for the cover pool of relevant structured covered bank bonds, if they are guaranteed by an eligible guarantee or secured by a mortgage. An eligible guarantee must be payable within 24 months upon default. Eligible guarantees for the purposes of such guaranteed loans can be provided in different contractual formats, including contracts of insurance, provided that they are granted by a public sector entity or a financial institution subject to public supervision. The guarantor for the purposes of such guaranteed loans must not have close links to the issuer of the covered bank bonds, and must be rated at least [A+/A1/AH] by an accepted ECAI over the life of the transaction.

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High quality substitute collateral up to 10 % of the cover pool is accepted. This threshold can only be exceeded after an in-depth review by the relevant NCB.

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The maximum portion of each individual eligible loan that can be funded through the structured covered bank bond issuance is 80 % loan-to-value (LTV). The LTV calculation must be based on a conservative market valuation.

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The minimum mandatory over-collateralisation is 8 %.

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The maximum loan amount for residential real estate loans is EUR 1 million.

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The stand-alone credit assessment of the cover pool must correspond to an annual PD level of 10 basis points in line with the “single A” threshold (see Section 6.3.1).

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A long-term minimum threshold of “single A” (“A-” by Fitch or Standard & Poor’s, or “A3” by Moody’s, or “AL” by DBRS) must be applied to the issuer and related entities which are part of or relevant to the transaction relating to the structured covered bank bond.

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Any commercial mortgage loans underlying the structured covered bank bonds must be denominated in euro; the issuer (and the debtor and guarantor, if they are legal persons) must be incorporated in a Member State, their underlying assets must be located in a Member State, and the law governing the loan must be that of a Member State.

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High quality substitute collateral up to 10 % of the cover pool is accepted. This threshold can only be exceeded after an in-depth review by the relevant NCB.

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The maximum portion of each individual eligible loan that can be funded through the structured covered bank bond issuance is 60 % LTV. The LTV calculation must be based on a conservative market valuation.

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The minimum mandatory over-collateralisation is 10 %.

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The share of each borrower in the cover pool, after aggregating all individual loan amounts outstanding from a given borrower, must not exceed 5 % of the cover pool’s total.

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The stand-alone credit assessment of the cover pool must correspond to credit quality step 1 in line with the Eurosystem rating scale (see Section 6.3.1).

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Credit quality step 2 must be applied to the issuer and related entities which are part of or relevant to the transaction relating to the structured covered bank bond.

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All underlying commercial mortgage loans need to be revalued at least on an annual basis. Price decreases of properties must be fully reflected in the revaluation. In the case of price increases, a 15 % haircut is applied. Loans that do not fulfil the LTV threshold requirement must be replaced by new loans, or must be over-collateralised, subject to the relevant NCB’s approval. The primary valuation methodology to be applied is the market value, i.e. the estimated price that would be obtained if the assets were sold on the market using reasonable efforts. This estimation must be based on the most conservative assumption. Statistical methods can also be applied but only as a secondary valuation methodology.

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Liquidity cushion in the form of cash in euro deposited with an eligible counterparty must be maintained at all times to cover all interest payments related to covered bank bonds for the subsequent six-month period.

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Whenever the short-term credit rating of the borrower of an underlying commercial mortgage loan falls below credit quality step 2 in the 9 months before a hard bullet covered bank bond matures, such borrower must post an amount of cash in euro sufficient to cover the relevant part of the covered bank bond principal payment as well as related expenses scheduled to be paid by the issuer under the covered bank bond to the liquidity cushion.

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In case of liquidity stress, the original maturity date can be extended up to 12 months to compensate for maturity mismatches between the amortising loans in the cover pool and the bullet redemption of the covered bank bond. However, the covered bank bond will become ineligible for own use after the original maturity date.

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The issuer of the covered bank bonds is a credit institution incorporated in an EU Member State, and is not a special-purpose vehicle, even if such covered bank bonds are guaranteed by a credit institution incorporated in an EU Member State.

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The issuer/issue of the covered bank bonds is subject, by the law of the Member State where the issuer is incorporated or where the covered bank bonds were issued, to special public supervision designed to protect covered bank bond holders.

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In the event of the insolvency of the issuer, covered bank bond holders have priority as regards reimbursement of the principal and payment of interest deriving from the (underlying) eligible assets.

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Sums deriving from the issue of the covered bank bonds must be invested (according to the investment rules set out by the covered bank bond documentation) in conformity with the relevant national covered bank bond legislation or other legislation applicable to the assets in question.’