Mortgage and Public Credit Bond Bill .

Covered bonds in the Eurosystem collateral framework

1.3 THE COVERED BOND PURCHASE PROGRAMME The Governing Council decided in May 2009 to establish a programme of outright purchases of covered bonds for monetary policy purposes .

Traditional covered bank bonds Debt instruments issued by corporate and other issuers ( 3 )

( f ) to introduce new eligibility criteria for the own use of nonUCITS covered bonds ( structured covered bonds ) with resi dential real estate loans as underlying assets

Hence , with all the measures taken , including the covered bond purchases , monetary policy will provide ongoing support for households and corporations .

The decision to purchase covered bonds outright was taken in order to support the covered bond market , which is a very important financial market in Europe and a primary source of financing for banks .

On 4 June 2009 the Governing Council decided upon the technical modalities of the purchase programme of euro denominated covered bonds which it had approved in principle at its 7 May 2009 meeting .

ECB Opinion on the Cypriot legislative framework enabling credit institutions to issue covered bonds

Securities lending in the covered bonds purchase programme ( CBPP ) On 4 March 2010 the Governing Council decided that the Eurosystem would be making available , for lending , its portfolio of covered bonds bought under the CBPP .

As at 31 December 2008 this item consisted mainly of a claim of Euros 460.0 million on the Magyar Nemzeti Bank in connection with an agreement established with the ECB on ECB Annual Report 2009

The covered bond purchases fostered primary issuance and reduced the particularly elevated spreads in this market .

( b ) covered bank bonds issued in accordance with the criteria set out in Article 22 ( 4 ) of the UCITS Directive

( b ) covered bank bonds issued in accordance with the criteria set out in Article 22 ( 4 ) of the UCITS Directive

( b ) covered bank bonds issued in accordance with the criteria set out in Article 22 ( 4 ) of the UCITS Directive

Technical modalities of the purchase programme for covered bonds

In addition , it decides in principle that the Eurosystem will purchase euro denominated covered bonds issued in the euro area .

However , all asset backed securities are included in category V , regardless of the classification of the issuer , and jumbo covered bank bonds are included in category II , while traditional covered bank bonds and other debt instruments issued by credit institutions are included in categories III and IV .'

However , all asset backed securities are included in category V , regardless of the classification of the issuer , and jumbo covered bank bonds are included in category II , while traditional covered bank bonds and other debt instruments issued by credit institutions are included in categories III and IV .

Agency debt instruments 4 ) Supranational debt instruments 1 ) In general , the issuer classification determines the liquidity category . However , all asset backed securities are included in category V , regardless of the classification of the issuer , and Jumbo covered bank bonds are included in category II , while traditional covered bank bonds and other debt instruments issued by credit institutions are included in categories III and IV .

The Eurosystem assesses the eligibility of assetbacked securities other than covered bank bonds against the following criteria .

It has bought securities backed by cash flows from private sector mortgages, so called covered bonds, and it has floated the idea of buying corporate bonds and multilateral securities issued by the European Investment Bank.

Covered bonds issued before 1 January 2008 will continue to be assessed against the previously applied criteria until their maturity .

It has not actually bought any bonds under the program.

Debt instruments other than covered bank bonds that are issued by credit institutions are only eligible if they are admitted to trading on a regulated market as defined above .

The Governing Council also decided , following the establishment of the programme for the purchase of covered bonds , to extend , as a matter of prudence , the scope of the provision to cover credit risk , in addition to foreign exchange rate , interest rate and gold price risks .

29 The high credit standards for covered bank bonds issued from 1 January 2008 are assessed on the basis of the above listed set of criteria .

Local and regional government debt instruments Jumbo covered bank bonds ( 3 ) Agency debt instruments ( 4 ) Supranational debt instruments

Local and regional government debt instruments Jumbo covered bank bonds ( 2 ) Agency debt instruments ( 3 ) Supranational debt instruments

This decision aimed to support the covered bond market , which is a very important segment of the financial market in the euro area and a primary source of financing for banks .

There has been a slight shift towards ( mainly short term ) market funding , while banks have become increasingly reliant on instruments such as mortgage bonds and securitisation .

In addition , the Governing Council of the ECB decides upon the technical modalities related to the purchase of euro denominated covered bonds issued in the euro area decided on 7 May 2009 .

Covered bank bonds issued prior to 1 January 2008 are deemed to fulfil high credit standards if they comply strictly with the criteria set out in Article 22 ( 4 ) of the UCITS Directive .'

Covered bank bonds issued prior to 1 January 2008 are deemed to fulfil high credit standards if they comply strictly with the criteria set out in Article 22 ( 4 ) of the UCITS Directive .

In parallel, the ECB has announced an outright monetary transactions (OMT) program to purchase bonds already trading on the secondary market.

Marketable assets issued by other agencies are included in liquidity category III .

Finally , the funding practices in the euro area also remain rather fragmented , varying from deposit funding to covered bonds and mortgage backed securities , in comparison with the US mortgage market , which revolves around the mortgage agencies .

( 26 ) Covered bank bonds are deemed to fulfil high credit standards irrespective of the rules set out in the criteria on ECAI credit assessment if they comply strictly with the criteria set out in Article 22 ( 4 ) of the UCITS Directive .

A few days later, the ECB established its outright monetary transactions program, which promised potentially unlimited purchases of troubled eurozone governments bonds.

On 22 February 2007 the Governing Council decided to treat covered bonds issued from 1 January 2008 in the same way as all other marketable assets within the Eurosystem credit assessment framework by subjecting them to the same rating requirements .

Bond funds

Key Key

Equity funds

Bond funds Mixed funds

Mixed funds