26Covered bonds

#### 26 Covered bonds (1) Covered bonds are bonds, notes or other debentures issued by an ADI, liabilities to the holders of which, or their representatives, are: (a) recoverable from the ADI; and (b) secured by assets beneficially owned by a covered bond special purpose vehicle. Purposes of covered bond special purpose vehicle (2) The purposes of the covered bond special purpose vehicle must relate only to the covered bonds. Cover pool (3) The cover pool for the covered bonds consists of the assets beneficially owned by the covered bond special purpose vehicle to the extent that they secure the liabilities to the holders or representatives equally or in priority to any other liabilities. > Note 1: The value of the cover pool will usually exceed the value of the liabilities to the holders or representatives. > Note 2: Assets in cover pools may change from time to time. Covered bond liabilities (4) The liabilities to the holders or representatives, and any other liabilities secured by assets beneficially owned by the covered bond special purpose vehicle, are covered bond liabilities of the ADI. > Note: This means that liabilities incurred by the covered bond special purpose vehicle can be covered bond liabilities of the ADI. (5) However, a liability to the ADI, other than a liability in relation to a derivative or the provision of services, secured in priority to any liability to the holders or representatives is not a covered bond liability of the ADI. Issuing ADI (6) The ADI is the issuing ADI for: (a) the cover pool; and (b) the covered bond special purpose vehicle.