Covered bondsCovered bonds

Covered bonds

1. An ADI may apply the risk weights in Table 9 to its covered bond exposures with an issue-specific external credit rating, where the requirements set out in paragraphs 15 and 16 of this Attachment are met.

2. Risk weights for rated covered bond exposures

1. An ADI may apply the risk weights in Table 9 where:
   1. the cover pool includes only the following assets:
      1. loans to, or guaranteed by, sovereigns or domestic PSEs;
      2. loans to, or guaranteed by, banks that qualify for a risk weight of 30 per cent or lower in accordance with paragraphs 8 to 10 of this Attachment; however, such assets cannot exceed 15 per cent of the cover pool;
      3. residential property exposures that meet the requirements in paragraphs 3 to 7 of Attachment A to this Prudential Standard for covered bonds issued in Australia, and as defined by the relevant supervisory authority for covered bonds issued in other jurisdictions, with an LVR equal to or less than 80 per cent; and
      4. commercial property exposures that meet the requirements in paragraphs 3 to 7 of Attachment A to this Prudential Standard for covered bonds issued in Australia, and as defined by the relevant supervisory authority for covered bonds issued in other jurisdictions, with an LVR equal to or less than 60 per cent;
   2. the nominal value of the cover pool exceeds the nominal outstanding value of the covered bond by at least 10 per cent; and
   3. the conditions set out in this paragraph are satisfied at the time of issuance, and at all times throughout the remaining maturity of the covered bond.
2. An ADI must be able to demonstrate to APRA that, at a minimum, the following information is available to the ADI on at least a semi-annual basis:
   1. the value of the cover pool and outstanding covered bonds;
   2. the geographical distribution and type of cover assets, loan size, interest rate and currency risks;
   3. the maturity structure of assets in the cover pool and of the covered bonds; and
   4. the percentage of loans that are 90 days or more past-due.
3. Where a covered bond is unrated or does not meet the requirements set out in paragraphs 15 and 16 of this Attachment, an ADI must treat the covered bond as a bank exposure and apply the risk weights in Table 7.