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26 January 2015 Supervision Supervision label Q&A

Question:

How does DNB check whether the value of a bank's cover assets is at least equal to the nominal value of outstanding registered covered bonds, taking into account the restrictions imposed by Article 129 of the CRR.

Answer:

The minimum required collateralisation is calculated using the methodology applied to calculate the minimum OC requirement of 105% (see the Q&A entitled 'How does DNB check compliance with the minimum OC requirement of 105%?'), taking into account the restrictions imposed by Article 129 of the Capital Requirements Regulation (CRR). These restrictions, which relate to loan-to-value and concentrations, imply that additional amounts must be deducted from the primary cover assets or from the market value of replacement cover assets. In the case of a covered bond programme with residential mortgage loan claims serving as primary cover assets, this means that the value of each individual mortgage loan claim is capped at 80% of the value of the underlying collateral for the purpose of calculating minimum collateralisation, taking into account the restrictions imposed by Article 129 of the CRR.

The example below supplements that given in the Q&As entitled 'How does DNB check compliance with the minimum OC requirement of 105%?'.

tabel

The aggregate value of the cover assets under Section 41f(2) of the Decree on Prudential Rules for Financial Undertakings (Besluit prudentiële regels Wft -Bpr) equals EUR 1,110.

This means that the issuing bank satisfies the requirement that the aggregate value of its cover assets (EUR 1,110) is at least equal to the nominal value of outstanding registered covered bonds, taking into account the restrictions imposed by Article 129 of the CRR (EUR 1,000).

sector

  • Banks