COVERED BOND LABEL April 2014

Outline

2

Objectives, Benefits and State of Play

Label Organisation and Processes

Covered Bond Label Convention

Transparency

3

Objectives, Benefits

& State of Play

Covered Bond Label – Objectives

4

High Standards

Regulatory

Recognition

Transparency

Liquidity

To enhance the quality, overall regulatory recognition

of and trust in the asset class

To protect / ring-fence the covered bond asset class

To identify and further develop the existing high

standards and quality features that define the product

To facilitate and improve access for investors, regulators

and other market participants to centralised,

comprehensive & up-to-date qualitative and

quantitative information

To promote liquidity and strengthen an active

secondary market

Benefits of the Covered Bond Label

5

The Covered Bond Label provides major benefits on the following items:

High Standards & Market Best Practice:

Identification of a high quality segment of the covered bond market

Identification of market best practices

Harmonisation:

Exchange and implementation of market & legislative best practices

Transparency:

Facilitation and improvement of access for investors, regulators and other market

participants to centralised, comprehensive & up-to-date qualitative and

quantitative information (Covered Bond Label website:

www.coveredbondlabel.com)

Reference to the Covered Bond Label on major data platforms such as

Bloomberg.

Governance:

Large market representation within the Covered Bond Label Committee

(Representatives of 11 largest covered bond jurisdictions and 4 major investment

banks)

Covered Bond Label Advisory Council which acts as a market participants’

think thank and includes, in particular, representatives of the ECB, EBA, national

central banks, rating agencies, etc.

Covered Bond Label – State of Play

6

As of February 2014, 81 labels have been granted (cover pools) to 69

issuers located in 13 different countries.

This represents more than 4000 bonds registered on the Label website

amounting to more than 1.4 trillion of Euros.

Number of Issuers Number of Labels Granted

7

Label Organisation

& Processes

Governance

8

Label Committee Label

Secretariat

Issuers

Market

Advisory

Council

European &

National

Authorities

Sends participants

on invitation by the

Label Committee

Supervises Advises

Self-Certification

Process

Advisory Decisional Operational

Sends participants

on invitation by the

Label Committee

Ability to raise

objections or

request for

additional

information

LABEL CONVENTION

Covered Bond Label Committee – Role Description

9

Covered Bond Label Committee

Role Decisional

Main

Responsibilities

and Remits

Decision-making and supervisory role in the Labelling process

Update and implementation of guidelines and procedures for the Labelling

process, including the withdrawal and appeal procedures

Setting of the annual operating budget of the CBL, including the level of

the subscription fees and the operational expenses

Approval of the annual accounts of the CBL

Convening of meetings of the Advisory Council

Preparation of an annual report on the Label activities.

Composition Members of largest covered bond jurisdictions and selected representatives

of investment banks

Meeting Frequency Quarterly

Covered Bond Label Committee – Members

10

National Representatives:

Carsten Tirsbaek Madsen (DK), Chairman

Waleed El-Amir (IT), Deputy Chairman

Jens Tolckmitt (DE)

Karsten Beltoft (DK)

Antonio Torio (ES)

Sandrine Guérin (FR)

Paul O’ Connor (IE)

Luciano Chiarelli (IT)

Matthias Achilles (LU)

Jac Besuijen (NL)

Øjvind Birkeland (NO)

Katarzyna Kapeller (AT)

Ana Manuela Marques (PT)

Per Tunestam (SE)

Chris Fielding (UK)

Investment Bank Representatives: Based on Rotation Principle

Julia Hoggett, Bank of America Merrill Lynch

Torsten Elling, Barclays

Boudewijn Dierick, BNP Paribas

Mauricio Noe, Deutsche Bank

Label Advisory Council – Role Description

Label Advisory Council

Role Advisory

Main

Responsibilities and

Remits

Market participants’ think-tank

Advisory role vis-à-vis the Label Committee

Support of the deployment of the Label in the market and constructively

contribute to improvements to the Label

Provision of opinions and/or advice upon consultations conducted by the

Label Committee

Provision of a forum whereby stakeholders can exchange views on issues that

may have a direct or indirect impact on the Industry

Composition

1 observer from the European Banking Authority (EBA)

1 observer from the European Central Bank (ECB)

3 representatives of national authorities (on a rotational basis)

3 covered bond market participants

ECBC Chairman and deputy Chairman

Meeting Frequency Ad Hoc (at least once a year)

11

Covered Bond Label Advisory Council – Members

12

Observer Representatives:

Lars Overby, Head of Unit, Regulation, EBA

Benjamin Sahel, Head of ECB's Market Operations Analysis Division

Market Representatives: Based on Rotation Principle

Andreas Denger, Senior Portfolio Manager at Meag Munich Ergo

Asset Management GmbH

Hélène Heberlein, Managing Director, Covered bonds, Fitch Rating

Peter Voisey, Clifford Chance

National Authority Representatives:

Ángel García de Frutos, Head of Assets Management Division,

Banco de España

François Haas, Deputy General Manager, DG Operations, Banque

de France

Michal Klestinec, Senior Portfolio Manager - National Bank of

Slovakia

Covered Bond Label – How it works

13

Covered

Bond

Issuer

Applies

for the

Label

Declares

compliance to

Label

Convention

Commits to

disclose

transparency

requirements

Obtains

the Label

Self certification process

Uploads

data on

Label

website

Posts

NTT on

their

website

NTT: National

Transparency

Template

Issuer application process in detail

14

Application

Dedicated

National Legislation

Dual recourse

Specific public

supervision on the

Cover Pool

UCITS & CRR

compliance

Dynamic Cover

Pool

Commitment to

provide the info in

line with National

Templates Link to Issuer

website

LABEL

Legislation

safeguards

Security

Features

intrinsic to

Cover Pool

Transparency

Issuer commitment

Predefined List

(limited choice)

Document or Link to

be provided

15

Covered Bond

Label Convention

Covered Bond Label Convention

16

The 2014 Label Convention requires compliance with Article

129 of the CRR and UCITS 52(4) in addition to three

supplementary requirements:

Public supervision of the pool as well as the institution

Asset class restriction to Residential Mortgages, Public

Sector Loans and Ships

Compliance with national transparency templates which

must meet the Label transparency standards (see Annex I

of the Label Convention)

a) The CB programme is embedded in a dedicated national

CB legislation;

b) The bond is issued by - or bondholders otherwise have full

recourse, direct or indirect*, to - a credit institution which is

subject to public regulation and supervision;

c) The obligations of the credit institution in respect of the

cover pool are supervised by public supervisory

authorities.

Label Convention - Legislation Safeguards

17

* Including pooling models consisting only of covered bonds issued by credit institutions.

a) Bondholders have a dual claim against: i. The issuing credit institution as referred to in point I b);

ii. A cover pool of financial assets * (mortgage, public sector and ship assets), ranking

senior to the unsecured creditors.

b) The credit institution has the ongoing obligation to maintain sufficient

assets in the cover pool to satisfy the claims of covered bondholders at all

times.

c) Issuers are committed to providing regular information enabling investors

to analyse the cover pool, following the guidelines developed at national

level (see Guidelines for National Transparency Templates).

Label Convention - Security Features Intrinsic

to the CB Product

18

* The financial assets eligible for the cover pool (including substitution assets and derivative

instruments) and their characteristics are defined in the national covered bond legislation which

complies with the requirements of Article 52(4) of the UCITS Directive and Article 129 of the

CRR, as well as those articles which specify its implementation. A phase-in period of up to 1

year from the 1st of January 2014 is granted to issuers where the national implementation of

CRR in their home country requires a longer implementation period.

Transparency templates are developed at the national level and made available on issuers’ websites.

Individual issuers are committed to provide high quality supportive information. National templates vary in

view of the different characteristics of each market. The following list identifies key recommended

transparency items to be included where appropriate.

Annex I - Guidelines for National

Transparency Templates

19

Overview

Homepage

Format

Frequency

General Information

Nominal Cover Pool Size

Overcollateralisation

Availability of historic cover pool data

Maturity of Covered Bonds

Nominal value of outstanding CBs

CRD compliant

Net present value of assets and

liabilities

Information on Currency Exposures

Information on substitution assets

Amortisation profile

Mortgage Assets

Number of loans

Loan size information

LTV information

Property type information

Geographic distribution

Is interest rate type information

available?

Repayment Type (Amortising, Interest

only, etc.)

Loan seasoning

Remaining loan maturities

NPL information and definition

Public Sector Assets

Geographic distribution

Number of loans and loan size

information

Distribution by type of debtor

Rating of obligors

Ship Assets

Number of loans

Loans size information

LTV information

Breakdown by type of ships

(container, tanker, bulk, other)

Breakdown by size of ships

Geographic breakdown by country of

registration

Loan seasoning

Remaining loan maturities

NPL information and definition

Breakdown by classification societies

20

Transparency

Covered Bond Label – Transparency Requirements

21

Asset Side

Cover Pool Information on the Issuer Website

The issuer will disclose, on its website, cover pool

information on a quarterly basis which will comply

with the National Transparency Template in use in

its relevant covered bond jurisdiction.

Cover Pool Information on the Label Website

Link to Cover Pool Information Compliant with

the National Transparency Template

Issuer

Pool Identifier

Country

Legal Framework

Pool Type (Public Sector, Mortgage, Ship

assets or Mixed)

Contact Person & Details

National Transparency

Templates

Monthly Issuance Level

Information

Covered Bond Information on the Label Website

The issuer will update, on the Label website, the

following items on (at a minimum) a monthly basis:

ISIN

Other Identifier

Initial Date of Issuance

Maturity Date

Currency

Face Value

Coupon (Fixed / Floating / Other)

Syndicated (Y/N)

Listed (Y/N)

Tapped (Y/N)

Extendable (Y/N)

Additional Information (e.g. link to Final Terms)

Liabilities Side

22

Covered

Pool Data

At issuance

level in a

comparable

format

Covered Bond Label Website

Covered

Bond

Data

Displayed (on each

individual issuer’s

profile from January

2013 onwards) on the

basis of the respective

National Transparency

Template

Issuer

Information

General

information on the

issuer and contact

points at issuer

and national level

Legislative

Framework

Description of the

legislative framework of

every covered bond

model and the official

legislative text in

English (the Covered

Bond Label Foundation’s

website provides a link

to the ECBC’s

Comparative Database

which contains a wealth

of information on the

different legal

backgrounds)

23

www.coveredbondlabel.com

Covered Bond Label - Synergies & Potential Partnership

24

Label IT

Platform

ECBC

Private

Firms

Authorities

&

Regulators

ECBC Database (National Framework Information)

European Central Bank

European Securities and Markets Authority

ECBC Website (latest regulatory developments,

position papers, WGs activities, ...)

Bloomberg

Euro MTS

European Banking Authority

European Commission

European DataWarehouse

Covered Bond Label in Bloomberg (1/2)

25

Covered Bond Label in Bloomberg (2/2)

26 Since 2013

Covered Bond Label

in MTS Cash and

MTS Bondvision

27 Since May 2013

Contact details

28

Covered Bond Label Foundation

(CBLF)

Avenue de Cortenbergh, 71

B-1000 Brussels Belgium

info@coveredbondlabel.com

+32 2 285 40 33

www.coveredbondlabel.com