The Regulated Covered Bonds Regulations 2008

Publication Date:January 01, 2008

2008No. 346

FINANCIAL SERVICES AND MARKETS

The Regulated Covered Bonds Regulations 2008

13thFebruary2008

14thFebruary2008

6thMarch2008

The Treasury are a government department designated for the purposes of section 2(2) of the European Communities Act 1972 1 in relation to-

(a) credit and financial institutions and the taking of deposits or other repayable funds from the public 2; and(b) measures relating to securities and rights in securities 3.

The Treasury, in exercise of the powers conferred by section 2(2) of that Act, make the following Regulations:

PART 1

INTRODUCTION

Citation, commencement and interpretation

1.-

(1) These Regulations may be cited as the Regulated Covered Bonds Regulations 2008 and come into force on 6th March 2008.

(2) In these Regulations-

"the 1986 Act" means the Insolvency Act 1986 4;

"the 2006 Act" means the Companies Act 2006 5;

"the 1989 Order" means the Insolvency (Northern Ireland) Order 1989 6;

"the Act" means the Financial Services and Markets Act 2000 7;

"asset" means any property, right, entitlement or interest;

"asset pool" has the meaning given by regulation 3;

"the Authority" means the Financial Services Authority;

"banking consolidation directive" means Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions 8;

"centre of main interests" has the same meaning as in Article 3(1) of Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings 9;

"connected person" has the meaning given by regulation 5;

"covered bond" means a bond in relation to which the claims attaching to that bond are guaranteed to be paid by an owner from an asset pool it owns;

"eligible property" has the meaning given by regulation 2;

"hedging agreement" means an agreement entered into or asset held as protection against possible financial loss;

"issuer" means a person which issues a covered bond;

"owner" has the meaning given by regulation 4;

"programme" means issues, or series of issues, of covered bonds which have substantially similar terms and are subject to a framework contract or contracts;

"registered office" has the meaning given by section 287 of the Companies Act 1985 10 (registered office) until the coming into force of section 86 of the 2006 Act (a company's registered office) when it will have the meaning given in that section;

"register of issuers" means the register maintained under regulation 7(1)(a);

"register of regulated covered bonds" means the register maintained under regulation 7(1)(b);

"regulated covered bond" means a covered bond or a programme of covered bonds, as the case may be, which is admitted to the register of regulated covered bonds;

"relevant asset pool" in relation to a regulated covered bond means the asset pool from which the claims attaching to that bond are guaranteed to be paid by the owner of that pool in the event of the failure of the issuer;

"relevant persons" has the meaning given by regulation 27(2);

"the Tribunal" means the Financial Services and Markets Tribunal established under section 132 of the Act (the Financial Services and Markets Tribunal).

(3) Unless otherwise defined, any expression used in these Regulations and in Article 22(4) of directive 85/611/EEC of the Council of 20 December 1985 relating to undertakings for collective investment in transferable securities 11 has the same meaning as in that Article of that Directive.

Eligible property

2.-

(1) In these Regulations "eligible property" means any interest in-

(a) eligible assets specified in and compliant with the requirements contained in paragraph 68 of Annex VI of the banking consolidation directive, provided that-(i) exposures to a body qualifying for credit quality step 2 on the credit quality assessment scale set out in that Annex shall not be eligible property; and(ii) senior units, issued by French Fonds Communs de Creances or by equivalent securitisation entities governed by the laws of the United Kingdom or an EEA state, securitising residential real estate or commercial real estate exposures may only be assessed as eligible assets if-(aa) the residential real estate or commercial real estate exposures secured were originated or acquired by the issuer or a connected person; and(bb) the senior units have a credit assessment by a nominated external credit assessment institution which is the most favourable category of credit assessment made by that external credit assessment institution;(b) loans to a registered social landlord or, in Northern Ireland, to a registered housing association where the loans are secured-(i) over housing accommodation; or(ii) by rental income from housing accommodation;(c) loans to a person ("A") which provides loans directly to a registered social landlord or, in Northern Ireland, to a registered housing association, where the loans to A are secured directly or indirectly-(i) over housing accommodation; or(ii) by rental income from housing accommodation;(d) loans to a project company of a project which is a public-private partnership project where the loans are secured by payments made by a public body with step-in rights;(e) loans to a person ("B") which provides loans directly to a project company of a project which is a public-private partnership project where the loans to B are secured directly or indirectly by payments made by a public body with step-in rights.

(2) Eligible property (and any relevant security) must be situated in an EEA state, Switzerland, the United States of America, Japan, Canada, Australia, New Zealand, the Channel Islands or the Isle of Man.

(3) In this regulation-

"the 1996 Act" means the Housing Act 1996 12;

"the 2001 Act" means the Housing (Scotland) Act 2001 13;

"housing accommodation"-

(a) in England and Wales, has the meaning given by section 63 of the 1996 Act (minor modifications: Part 1);(b) in Scotland, has the meaning given by section 111 of the 2001 Act (interpretation); and(c) in Northern Ireland, has the meaning given by Article 2 of the Housing (Northern Ireland) Order 1981 14;

"project company" has the meaning given by paragraph 4H of Schedule A1 to the 1986 Act or, in Northern Ireland, paragraph 12 of Schedule A1 to the 1989 Order;

"public body" means a body which exercises public functions;

"public-private partnership project" has the meaning given by paragraph 4I of Schedule A1 to the 1986 Act or, in Northern Ireland, paragraph 13 of Schedule A1 to the 1989 Order;

"registered housing association" means a body registered as a housing association under Chapter II of Part II of the Housing (Northern Ireland) Order 1992 15;

"registered social landlord"-

(a) in England and Wales, means a body registered as a social landlord under Part 1 of the 1996 Act; and(b) in Scotland, means a body registered as a social landlord under Part 3 of the 2001 Act;

"step-in rights" has the meaning given by paragraph 4J of Schedule A1 to the 1986 Act or, in Northern Ireland, paragraph 14 of Schedule A1 to the 1989 Order.

(4) Unless otherwise defined, any expression used in this regulation and the banking consolidation directive has the same meaning as in that directive.

Asset Pool

3.-

(1) Subject to paragraph (2), in these Regulations an "asset pool" comprises the following assets-

(a) sums derived from the issue of regulated covered bonds and lent to the owner in accordance with regulation 16;(b) eligible property which is acquired by the owner using sums lent to it in accordance with regulation 22;(c) eligible property transferred to the asset pool by the issuer or a connected person to enable the issuer or owner, as the case may be, to comply with-(i) the requirements specified in regulation 17(2);(ii) a direction of the Authority under regulation 30; or(iii) an order of the court under regulation 33;(d) eligible property transferred to the asset pool by the issuer or a connected person for the purpose of over collateralisation;(e) contracts relating to the asset pool or to a regulated covered bond;(f) eligible property acquired by the owner using sums derived from any of the assets referred to in sub-paragraph (b), (c), (d) or (e);(g) sums derived from any of the assets referred to in sub-paragraph (b), (c), (d), (e) or (f); and(h) sums lent by persons (other than the issuer) to the owner to enable it to comply with the requirements specified in regulation 24(1)(a).

(2) Any of the assets referred to in sub-paragraphs (a) to (f) and (h) of paragraph (1) may only form part of an asset pool at any time if they are recorded at that time, pursuant to arrangements made in accordance with regulation 17, 23 or 24, as being in that pool.

(3) In paragraph (1), "over collateralisation" means the provision of additional assets that assist the payment from the relevant asset pool of claims attaching to a regulated covered bond in the event of the failure of the issuer.

Owner

4.In these Regulations "owner" means a person which -

(a) owns an asset pool; and(b) issues a guarantee to pay from that asset pool claims attaching to a regulated covered bond in the event of a failure of the issuer of that bond.

Connected person

5.-

(1) In these Regulations "connected person" in relation to an issuer means a person which-

(a) is-(i) a parent undertaking of the issuer;(ii) a subsidiary undertaking of the issuer; or(iii) a subsidiary undertaking of a parent undertaking of the issuer;(b) has its registered office in the United Kingdom; and(c) either-(i) has its centre of main interests in the United Kingdom; or(ii) is authorised under Part 4 of the Act (permission to carry on regulated activities) to carry on the regulated activity referred to in article 5 (accepting deposits) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 16.

(2) In paragraph (1) "parent undertaking" and "subsidiary undertaking" have the meanings given by section 1162 of the 2006 Act (parent and subsidiary...

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