Banking (prudential standard) determination No. 11 of 2022
Covered bond special purpose vehicleCovered bond special purpose vehicle
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Covered bond special purpose vehicle
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All agreements, rights and obligations between the issuing ADI, covered bond special purpose vehicles and covered bond holders must be formally and legally documented and must set out the full scope of such agreements, rights and obligations. All affected assets must be dealt with in accordance with these agreements.
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Where assets that have been transferred by the issuing ADI to a covered bond special purpose vehicle are administered by the ADI or an affiliated entity, the assets should, to the maximum extent practicable, continue to be administered consistently with the ADI’s policies for similar assets and this requirement should be contained in relevant legal documents.
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An issuing ADI must maintain an accurate and up-to-date register of assets in the cover pool.[3]
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An issuing ADI may maintain a separate, accurate and up‑to‑date register of assets held by the covered bond special purpose vehicle that do not form part of the cover pool or secure covered bond liabilities.[4]
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An issuing ADI must be able to report to APRA at any time, upon written request, assets in the registers referred to in paragraphs 17 and 18 above.
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When determining whether an asset is part of a cover pool, an issuing ADI must have regard to the priority of claims under all possible scenarios, not just under a business‑as‑usual scenario.
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Any assets added to the cover pool, or otherwise provided to the cover bond special purpose vehicle, or returned to the issuing ADI, must be clearly identified.
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The issuing ADI must be able to identify, at all times, all derivatives and other transactions outstanding with a covered bond special purpose vehicle.
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An issuing ADI must ensure that agreements between the ADI, the covered bond special purpose vehicle and covered bond holders:
(a) require that all assets not securing covered bond liabilities return to the ADI within one month of a default relating to the covered bond;
(b) only permit assets of the covered bond special purpose vehicle to become part of the cover pool or otherwise subject to claims by third parties following an express written instruction to do so by the ADI; and
(c) only permit assets of the covered bond special purpose vehicle to be sold, liquidated or otherwise disposed of:
(i) after first providing the issuing ADI with a reasonable opportunity to acquire the assets on similar terms; and
(ii) if the assets are not acquired by the issuing ADI, then for not less than the asset’s market price (if there is one) or otherwise for the best price reasonably obtainable having regard to the circumstances existing when they are sold.