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ICMA AMIC Covered Bond Investor Council publishes report on cover pool data disclosure on 21 August 2014  

Progress on transparency in the European Covered Bond market, ICMA report calls for further disclosure of cover pool data. To view the ICMA Transparency report click here. To view the press release, click here.

 



Follow up to the CBIC/Covered Bond Report event held in Frankfurt on 15 May 2014 

Andreas Denger, Acting Chairman of the CBIC, reviewed the progress made with the transparency template, 2 years on.

 



Follow up to the CBIC/Covered Bond Report event held in Frankfurt on 10 May 2012

Andreas Denger, Vice Chairman of the CBIC, presented the transparency template, its rationale and the amendments made to the template.

The template showing all the amendments made is available here. As Andreas Denger mentioned, the final template will be finalised at the end of May and the CBIC will consider last comments on the template up to the end of May.




CBIC feedback statement on investors’ comments (published 12 April 2012)

 Content – Fields to add

 1.       Add some programme details (e.g. transaction counterparties, programme tests etc)

 The template was drafted to meet investors’ common requirements on a pan-European basis to and therefore cannot accommodate all the requirements of every single investor, at this stage. It is expected that the template represents the needs of investors but also reflects the fragmentation of the European covered bond market – some investors having a focus on the cover pool, others on the general issuer section. It is for each investor to decide what analysis and focus they will take on the data received from issuers. The CBIC European transparency standards template attempts to strike a balance between the ever increasing investors information requirements, and ensure that they can receive information from issuers in a similar template, to be able to compare and analyse the information. However investors can ask for all information they deemed relevant during bilateral meetings with issuers.

 2.       Information about liquidity buffers (90/180 days, what it holds, if required by law)

Covered bonds legal requirements are already easily accessible and comparable via the ECBC Covered Bond Comparative Database where there is a detailed Exposure Liquidity Risk section, and the template endeavours not to duplicate other templates.

The substitute assets fields included in the current template should help investors assess what the liquidity buffers holds. 

3.       Rating of the issuer and the issues by the different rating agencies

The template already has an additional section specifically asking issuers for ratings, and would encourage issuers to fill in this section as well.

4.       If the issuer is a special legal entity, identify the major/shareholder group (e.g. French case)

This question was raised by the French CFF. The CBIC replied that the template met investors’ common requirements on a pan-European basis and did not necessarily try to accommodate all the different banking models. A substantial part of the template is focusing on cover pool data and key concepts’ explanations which are highly relevant information irrespective of banking model.  The General Issuer Data may prove more challenging to fill in for some issuers than others because of their structures, notably in the French case where there are different covered bond issuers within the same conglomerate. The CBIC believes that the CBIC template will form the basis of further discussions between issuers and investors about definitions and how to fill in the template to make it as informative as possible. In addition CBIC members would expect a brief explanation describing the position of the covered bond issuer within the conglomerate and its links to the sponsor institution. In the French case, where there are different covered bond issuers within the same conglomerate, CBIC members would recommend the issuer to publish as much information as possible at the specialised financial institution level on the General Issuer Data template and add a General Issuer Data template for information at the conglomerate level. 

5.       Total % if encumbered assets of total assets

At this stage there is no agreed definition on asset encumbrance.. However a field that may be relevant to investors, and offering comparable data, is the level of assets pledged to the national central banks. The template will accommodate a field entitled ‘% of assets used by national central bank’ in its General Issuer Data section. 

6.       To compare the data provided by different issuers – would make sense to attach common definitions to the reported data (calculation of LTV, NPL etc.)

The CBIC recognises that different European jurisdictions use different definitions for different key concepts for covered bonds. The CBIC has always felt that each jurisdiction should explain their terminology used in the key concepts dedicated sheet (as the FNO did in its national template).  The aim of the project was not to set common definitions for the European covered bond market, but for investors to receive data as well as explanations behind the data so that they are able to perform their own analysis – in a standardised way.

7.       Legal maximum LTV levels

Covered bonds legal requirements are already easily accessible and comparable via the ECBC Covered Bond Comparative Database in section IV. Valuation of the mortgage cover pool and LTV criteria.

8.       In the commercial real-estate, add: interest coverage and debt service coverage ratios, average and split in different buckets (for instance <0.5, <0.75, <1, <1.25 etc) and receive information about the top 10 loans

The template does not call for a loan-by-loan transparency template, and therefore does not intend to request information about the top 10 loans. Regarding the interest coverage and debt service coverage ratios, the template reflected that the information received will not meaningful as the figures that will be received will not be comparable and confuse the template rather than enrich it.

9.       Country of assets for Residential and Commercial

The template requests this type of information in the Cover Pool data template, under ‘Composition of the mortgage cover pool’.

10.   Disclosure (ISIN) of substitution assets

The CBIC European transparency standards template attempts to strike a balance between the ever increasing investors information requirements, and ensure that they can receive information from issuers in a similar template, to be able to compare and analyse the information. However investors can ask for all information they deemed relevant during bilateral meetings with issuers.

11.   Swaps – provide swap documents to investors

Like ISIN disclosure discussed in point 10 this information may in fact be only relevant to a minority of investors and unfortunately the template cannot accommodate all the requirements of every single investor. However investors can ask for all information they deemed relevant during bilateral meetings with issuers. Moreover when the proposed template is fully implemented more relevant information fields may be added to this template.

Format

12.   Some work needs to be done on the layout on the left hand side of the various excel sheets to accommodate the different levels of data asked for in the required fields

The template will reflect the different date field request for ease of use by issuers.

13.   The data should allow analysis as time series, also in a graphical format

The CBIC European standards template has not yet been implemented, but is hoped to also be a driver to build historical data that each investor will be able to analyse according to their own requirements.

Accessibility

14.   Clarify the frequency of publication of these template by issuers (e.g. in the UK some existing investor reports are produced monthly)

At the CBIC October 2011 meeting it was agreed that Data should be reported on minimum a half-yearly basis and shortly after issuers’ results are published.

15.   Less detailed but more frequent helpful, given the speed at which banks balance sheet can change.

Monitoring balance sheet changes through data received on a half yearly basis should provide relevant information for covered bond investors. However if it becomes clear that the data does not provide enough information about changes in the balance sheet, the CBIC will review the template accordingly. Investors can also ask for all information they deemed relevant during bilateral meetings with issuers.

16.   Information should be published through at least one common platform, with additional access through for example Bloomberg

This useful suggestion will be looked at once the final template is published to ensure easy access to relevant information to investors.



CBIC Feedback statement on UK RCBC, published 21 February 2012 

CBIC members greatly appreciated the constructive comments from the UK RCBC. Here are the members’ responses.

  • Need for flexibility: In general, RCBC members consider it desirable to maintain flexibility in response of any adopted transparency standards to ensure that such standards are able to accommodate and adjust as appropriate for what remains a dynamic funding environment.
  • At the first CBIC meeting held to consider some key points for the second round of consultation, the group agreed that only issuers using the CBIC template will be allowed to post on the dedicated webpage – to ensure standardisation and comparability of the data received. CBIC members recognise that this could generate additional administrative burden for issuers, but think this step is key to European standardisation and would be a great advantage for the European covered bond market and would eventually lower funding cost. It was also emphasised that the CBIC never expected all issuers to fill in all the fields – not all information is relevant for all issuers. Discussions on a bilateral basis with issuers of the blank fields should hopefully help individual issuers and/or national organisations identifying where to enhance transparency levels incrementally.

    Indeed CBIC members feel that it is key for issuers to agree at national level on common key definitions. The CBIC is fully aware that they are not in a position to impose national definitions upon issuers and indeed this was not the intention of the template. The key concept section has been added so that relevant background and definitions could be given.

    Finally the group also discussed whether a threshold should be set under which issuers will not be able post their data on the CBIC webpage. Although it was agreed that there should be a minimum of policing, and that too little relevant information would not be helpful – there would not be any minimum standards.

  • Considerations regarding non-public and unaudited information.
  • The CBIC has always been of the view that it was up to each issuer to decide how much data it would provide on the basis of the CBIC template requirements. It is clear that the more completed the template is the better. However there is no set minimum requirement. Some issuers may feel and/or be obliged for compliance reasons that only audited data can be provided at this stage of the projects. If further market discussions between issuers and investors reveal that publications of additional information is in fact of mutual interest then these figures could get audited and published. CBIC members consider the template as a guideline for an ever improving transparency regime. The template has been agreed on a pan European basis and cater for a wide range of investors’ needs, hopefully the template achieved a balance that the UK RCBC feels is flexible enough.

  • Need for clarification
  • - ‘Certain requirements referred to are not clearly defined or described ... information [may be reported] on a different basis’

    The CBIC has undertaken this second round of consultation to ensure that all detailed questions raised in the first round or after are answered. It came to light that indeed certain requirements may not have been as clear, and all CBIC responses are available on line. This second round will inform the new template. The CBIC will remain open to detailed questions should there be a need.

    - Issuer financial information is to be provided on the issuer’s consolidated solo or group balance sheet

    The CBIC drafted the template to meet investors’ common requirements on a pan-European basis to and has not necessarily tried to accommodate all the different banking models. A substantial part of the template is focusing on cover pool data and key concepts’ explanations which are highly relevant information irrespective of banking model.  The General Issuer Data may prove more challenging to fill in for some issuers than others because of their structures, notably where there are different covered bond issuers within the same conglomerate. As stated earlier the CBIC believes that the CBIC template will form the basis of further discussions between issuers and investors about definitions and how to fill in the template to make it as informative as possible. In addition CBIC members would expect a brief explanation describing the position of the covered bond issuer within the conglomerate and its links to the sponsor institution. Where  there are different covered bond issuers within the same conglomerate, CBIC members  would recommend the issuer to publish as much information as possible at the specialised financial institution level on the General Issuer Data template and add a General Issuer Data template for information at the conglomerate level. 

    - Where an issuer has more than one covered bond programme, whether the required information should be provided on a programme basis or in the aggregate

    CBIC members expect that data will be provided on a programme basis for the cover pool data, and on an aggregate basis for the whole group, if applicable, for the general issuer data.

    - It is not clear whether the definitions of certain key terms applied under UK covered bond programmes should also apply to such terms as they are used in the proposed standard. Additionally certain definitions relating to, amongst other things, NPV, expected maturity and overcollateralisation will need to be further clarified in relation to application to the UK programmes.

    The CBIC template has provided for these differences at national level by having a key concepts section. Overcollateralisation and expected maturity are already expected to be further explained in this section by issuers. As regards NPV CBIC believed that it was up to issuers to decide on a national common discount curve. The template will be revised so that the agreed definition on the discount curve can be explained in the key concepts section.

    - Considerations should be given as to whether certain aspects of the information should be covered by policies rather than by auditable data fields, such as granular data on insured, guaranteed loans or owner occupied loans.

    The CBIC template requests two types of information. It is expected that issuers describe insurance and guaranteed policies as well as owner occupied loans in the key concept section. It is also expected that the description will help understand that the data provided in the cover pool section of the template. CBIC members would expect both information to be made available.

    - However more generally RCBC members note that it is difficult to comment on the accessibility of certain information in the absence of certainty as to what is intended to be captured by the relevant data field. However, more generally RCBC members note that it is difficult to comment on the accessibility of certain information in the absence of certainty as to what is intended to be captured by the relevant data field. 

    It is expected that the final list will be used as a template and guideline for national jurisdictions. However the CBIC believes that transparency standards are a milestone in the roadmap towards a better transparency regime in Europe. In parallel investors may also find the documents useful as a guide in their bilateral meetings with issuers, highlighting investors’ needs and requests on transparency. Filling in the list (fully or partially) and providing the data is of course voluntary. The CBIC is well aware that not all jurisdictions or issuers will be in a position to provide all of the requested data. Nonetheless, the CBIC invites all issuers to be as accurate and comprehensive as possible in filling in the data list. Providing consistent data and transparency for their covered bond products should favour issuers and their respective jurisdictions in increasing investors’ confidence in their product. To accommodate the differences between markets and jurisdictions and deviations from the data list which potentially could occur, additional remarks in the data list at the “Additional comments” section could be given. As aforementioned the transparency standards, and this consultation, are part of the roadmap towards a better transparency regime in Europe.

    The CBIC is keen to get clarification from the UK RCBC on the areas they need further clarification.

    - Mismatch with existing reporting practices – frequency

    At the first investors’ meeting following receiving feedback on the template, the format of the template was discussed as well as the possibility of making a template similar to already existing national templates. It was agreed that the CBIC template should be independent from other existing templates. The new CBIC template, taking into account responses and bilateral discussions, will remain in an Excel format. Data should be reported on a half-yearly basis and shortly after issuers’ results are published. CBIC members believe that this is in fact quite a flexible approach to reporting data compared to other existing reporting requirements.




    CBIC Feedback Statement on Crédit Foncier de France (CFF) comments, 23 January 2012

    CBIC members greatly appreciated the constructive comments from the CFF.

    Before commenting on the specific questions raised in your response we would like to highlight some of the conclusions of our first meeting held on 31 October 2011.
    Some basic points were agreed:

  • The information should be freely available for all investors.
  • It must be presented in an Excel sheet format
  • Data should be reported on a half-yearly basis and shortly after issuers’ results are published.
  • The CBIC through the ICMA owns the template. ICMA is to draft appropriate disclaimers.
  • The issuers will post a link to the CBIC European transparency standards webpage – and can add or remove the link, should they want to.
  • This link must give access to the CBIC template with information provided by the issuer. Issuers are responsible for the information posted. Additionally issuers may wish to consider giving access to additional information to investors through the link.
  • We would like to draw your attention to this last point. By filling in the CBIC template, partly or fully, issuers have the opportunity to provide investors with comprehensive information but issuers can also provide investors with additional information they deem relevant.

    Comment from CFF and our replies:

    The proposed format (general data at sponsor level and cover pool stratifications) appears better suited for issuers sharing the same balance sheet with the sponsor (German or Spanish model), as opposed to the separate balance sheet format used in countries such as France, Ireland or Norway. In the latter case, the non privileged liability structure is not reviewed (senior unsecured debt, subordinated debt, equity..), nor is its duration.

    The CBIC drafted the template to meet investors’ common requirements on a pan-European basis and has not necessarily tried to accommodate all the different banking models. A substantial part of the template is focusing on cover pool data and key concepts’ explanations which are highly relevant information irrespective of banking model.  The General Issuer Data may prove more challenging to fill in for some issuers than others because of their structures, notably in the CFF case where there are different covered bond issuers within the same conglomerate. As stated earlier the CBIC believes that the CBIC template will form the basis of further discussions between issuers and investors about definitions and how to fill in the template to make it as informative as possible. In addition CBIC members would expect a brief explanation describing the position of the covered bond issuer within the conglomerate and its links to the sponsor institution. In the CFF case, where there are different covered bond issuers within the same conglomerate, CBIC members would recommend the issuer to publish as much information as possible at the specialised financial institution level on the General Issuer Data template and add a General Issuer Data template for information at the conglomerate level.  

    Regarding the way information is presented, excluding the key figures section for the moment, we would advocate structuring the information under “Asset” or “Liability” headings at the various “balance sheet” levels.  We would also expect information requests to be more detailed at the cover pool/issuer level than at the sponsor level, which is not really the case in the proposed template.

    The CBIC discussed the structure of the template, and believes that the distinction between ‘asset’ and ‘liability’ is sufficiently evident. Furthermore information regarding refinancing risks should be presented together to provide a better overview to investors. Finally by filling in the general issuer section for the specialised financial institution level issuer, further data will be made available.

    We would also suggest for reliance purposes sticking to figures that are audited (excluding for example concepts such as net margin).

    The CBIC has always been of the view that it was up to each issuer to decide how much data it would provide on the basis of the CBIC template requirements. It is clear that the more completed the template is the better. However there is no set minimum requirement. Some issuers may feel that only audited data can be provided at this stage of the projects. For compliance reasons issuers may want to only publish audited data. If further market discussions between issuers and investors reveal that publications of additional information is in fact of mutual interest then these figures could get audited and published. CBIC members consider the template as a guideline for an ever improving transparency regime.

    There is no ability to report loans that benefit from a double guarantee (public and mortgage). Examples of such loans include social loans underwritten under the Fonds de Garantie à l’Aide Sociale in France, the NHG scheme in the Netherlands or similar residential loans distributed in Canada.

    The CBIC understands that there are different types of guarantees, and indeed provided within the ‘Key concept’s explanations’ tab a section where issuers are to explain how the loans can be insured and provide details of guarantors. CBIC members would expect further explanations in this section to explain national specificities.

    Regarding French residential mortgages, we believe that the template should include a reference to the Debt Service Coverage Ratio (proportion of the loan instalment in the monthly salary), which is a key underwriting criterion.

    The CBIC drafted the template to meet investors’ common requirements on a pan-European basis and has not necessarily tried to accommodate all the different national models. In the case of the Debt Service Coverage Ratio CBIC members believe that it is in the issuers remit of responsibilities, and in fact that this is a pre-requisite to be taken into account in the lending process by issuers. Loans that do not meet a required minimum Debt Service Coverage ratio criterion would therefore not be in the cover pool. In addition, for this criterion to become meaningful for investors more information about the credit process within banks and their lending procedures can be provided as well.

    Even though that type of information does not change every quarter, we think that a summary on the definition of a French mortgage loan, with a description of enforcement procedures, timing and costs, should feature as well. That is also true of the local legal framework for Covered Bonds.

    CBIC members did not ask for this information as they felt it was too dependent upon national characteristics. CBIC members are happy for each issuer to decide to provide this information if they deem it relevant as long as issuers comply with the CBIC transparency template.

    There should also be information on rolling 180 days liquidity coverage.

    The CBIC understands that this is part of a French and German pre-requisite on the legal side. CBIC members would assume that issuers would comply with the law. CBIC members encourage issuers to provide this information, if they deem it relevant, as long as issuers comply with the CBIC transparency template.

    We think the fixed/floating rate distinction is not very useful (whether on assets or liabilities), if it is looked at independently of the derivatives policy of the issuer.

    CBIC members asked for the distinction between fixed/floating rate distinction not to assess asset-liability arrangements but to assess the level of risks of loans, and get an indication of how many loans will be sensitive to changes in interest rates is clearly relevant in that respect. CBIC members believe that this distinction is therefore useful. 

       
    General Issuer Data


    Out of consistency, all information fields should be provided for two financial years, rather than 3 in some cases.

    The CBIC template will ensure consistency in the different fields.

    Funding:

  • Within 'wholesale', separate between 'Covered' and not,
  • CBIC members believe that this would be an appropriate distinction and that will take this distinction into account.

  • Clarify Interbank vs other and  Registered vs Bearer  
  • Interbank: Monies owed to other banks versus, say, monies owed to non-bank institutions such as insurance companies, money market funds, other institutional investors and corporates.

    Registered vs. bearer: Registered bonds are assigned to specific named holders and thus more loan-like and cumbersome to sell and transfer. Bearer bonds are not assigned to specific holders and can thus be bought and sold without any entry into a bond registry.

    Mortgage loan information: it should be clear that the information that is requested is on the underlying under the RMBS format or under other formats where there is recourse to the mortgage loans, but where those loans are not directly held by the cover pool.

    As aforementioned the higher the level of transparency is, the better it is. CBIC members expect the issuers to have the underlying data for internally generated RMBS. However covered bond investors require less granular information, and if issuers decide to provide RMBS data CBIC members would expect the data to be split in a way that provides relevant information.

    Gross or Net Margin: this point would not make sense for us, as loans are purchased by the issuer at a price different from their nominal value. We can however provide information on the net profit or the ROE of the issuer, due to the dedicated balance sheet format. We could also provide profit NPV calculations over say a 15 year horizon.

    The CBIC understands that margins may be difficult for issuers to provide and has mentioned in the past that blanks were also acceptable in the completion of the template.  


    General Cover Pool Information


    Clarify the difference between Cover Pool Size and Outstanding.

    This is a typo in the first template. CBIC members will rectify the template and use ‘Covered Bond Outstanding’. The ‘general cover pool information’ section will now be entitled ‘general information’.

    The French legal framework is using nominal value o/c instead of NPV o/c so we cannot communicate on an NPV basis.

    CBIC recognises that the definition and therefore measurement of O/C from one issuer to another is very fragmented, which is why we ask for further clarification in the key concepts section. If it is not possible to communicate on an NPV basis then issuers will have to publish on a nominal basis.

    We suggest separating ABS between RMBS and CMBS.


    The CBIC believes that it will indeed make an interesting distinction, and will amend the template accordingly.

    Cover Pool WAL: we believe the figure should exclude Replacement Assets.

    The CBIC would welcome a discussion with CFF on why this should be excluded.

    Expected Maturity: we propose to use an expected prepayment rate, whereas for Legal Maturity we would suggest a zero prepayment rate;
    Maturity structure: the bucket information suggested makes sense, as an alternative one could  provide the pay down curve on the assets and liabilities sides.

    CBIC members agree with this proposal if RMBS are part of the assets in the cover pool – following the same principle applied to loans in the cover pool.

    Soft or hard bullet should be related to 'liabilities' as opposed to 'assets'.

    The CBIC agrees that the question about soft and hard bullet structures should be part of the General Information on the cover pool data. The data field relates to the liabilities and not the assets in the cover pool.

    Eligible assets in cover pool: in the French framework, all assets in the cover pool are eligible, one could interpret the question as removing those assets that have a zero per cent risk weight in the regulatory over collateralisation ratio.

    The CBIC did not intend to interpret the eligibility requests in this particular way. If all assets are eligible it should be shown in the template as 100%. Different jurisdictions have different features regarding eligibility criteria.

    Insured mortgages: please specify what type of insurance is relevant here: borrower insurance (life, disability) or property insurance.

    In the Key concept’s explanations, under ‘insured mortgages’ issuers are able to provide information on how the loans are insured and provide details of insurers. CBIC members believe that this should provide the relevant information.




    Summary of meeting with FNO, 29 November 2011 


    Update:
    The FNO has now published its transparency standards for Norwegian issuers which can be found on their website.

    The CBIC held discussions with the FNO in Norway on the basis of questions they had regarding the CBIC European transparency standards.

    The CBIC welcomes the efforts of Norwegian issuers to agree upon national definitions of key concepts. It is worth noting, that in addition to quantitative data, the template has also provided space for more specific explanations regarding definitions and methods of calculations. In fact these explanations are of high interest to investors so as to fully understand the reported data and enable meaningful comparisons. Figures on their own do not provide the required clarity to assess a cover pool. Figures should be seen in context (calculation methods, special characteristics of jurisdictions…). This section will be as valuable as other sections of the template. Indeed the better the explanations of these concepts and definitions are, the more valuable information investors will collect.

    As some of the CBIC responses show, we anticipate jurisdictions to take into consideration their domestic models, and some guidelines may not apply in the same way to all countries. The CBIC believes that the CBIC template, amongst other things, will form the basis of ongoing discussions between issuers and National organisations and investors about definitions. The CBIC anticipates that definitions and concepts may have to be adapted if issuers and national organisations can see that changing definitions and concepts is helpful and will enable lower funding cost.

    Here are the detailed comments on the FNO questions:

    1) What is meant by Cover Pool outstanding (as different from Cover Pool Size)?

    This is a typo in the first template. CBIC members will rectify the template and use ‘Covered Bond Outstanding’.  The ‘general cover pool information’  section will now be entitled ‘general information’. 

    2) Maturity structure cover pool/covered bond: Should loans with installments be split into the maturity buckets to which the installments belong, or should the entire loan be put into the bucket of the last installment? 

    By answering questions about both legal and expected maturity, the issuer will have the possibility to highlight the risk associated with refinancing due to the mismatch between cash and asset and liabilities – a risk that has attracted increasing scrutiny in the last years.

    Within the ‘Legal maturity’ field, the CBIC expects that if the installment is fixed then loans should be split according to the maturity buckets to which the installments belong - if the installment is not fixed then the ‘worst case scenario’ (longest possible duration bucket) has to be the guideline. Within the ‘Expected maturity’ field, the CBIC anticipates that expected premature repayment will be included. 

    The CBIC  mentioned that this may be viewed differently from one country to the next.  

    3) Under the heading Composition of the mortgage cover pool, a question relates to soft or hard bullets structures. Does this question relate to bonds held as assets in the cover pool? If the question is related to the liabilities it will be dealt with under another heading (headings), that is Covered Bond, Legal/Expected maturity.

    The CBIC agrees that the question about soft and hard bullets structures should be part of the General Information on the cover pool data. The data field relates to the liabilities and not the assets in the cover pool. The difference between maturity structures of cover bonds included in the Legal and Expected maturity should also reflect the difference between soft and hard bullet. 

    The CBIC mentioned that we wanted the two fields filled in for ease of analysis.

    4) Under the heading Residential mortgages, information is asked about % of buy to let, % of non owner occupied, and % of second home. These items seem to be partially overlapping. We take it Buy to let typically includes apartment buildings and blocks where the tenants pay rent. Similarly, we suppose a single house that the owner lets to someone on the open market is included. But what other types of mortgages are included therein? And what is the difference to Non owner occupied? Obviously, a house that is let is at the same time non owner occupied – is Non owner occupied meant to be something different? As for Second home, is that meant to include just commuters’ dwellings, or are holiday dwellings also included? 

    The CBIC recognises that different European jurisdictions use different terms regarding products. The CBIC feels that each jurisdiction should agree on the terminology to use for all residential mortgages products, and explain their terminology used in the key concepts dedicated sheet.  

    The CBIC recognises that some questions may be overlapping but this is a reflection of the fragmentation of the European mortgage markets – and covering many jurisdictions. Some markets have a tradition of buy-to-let mortgages and information about the exposure to this segment is key for investors. On the other hand, other markets have relatively significant exposure to second homes which include: commuter’s dwelling and holiday dwelling, and property bought for more short term investment purpose.

    We discussed the difference between non-owner occupied and buy-to-let. The CBIC emphasized that it was for the FNO to come up with a defined typology of the products in their market. 

    5) Still under Residential mortgages, there is a question on % of interest only loans, and a question on Repayment type (repayment/interest only). In Norway all loans have to be repaid at some definite time in the future (usually at most 30 years from the date of the registration of the mortgage). The loans may be structured in many ways: Some borrowers start to pay regular installments immediately (annuities or fixed installments), whereas others may be given a short period – say two to five years – when they pay only interest, and then start to pay installments. Finally, there may be cases of bullet loans, where the borrower repays the entire principal at the final term of the loan. We shall appreciate a detailed definition of interest only loans.   

    Question 5 is addressed by Question 4 with the use of terminology. A more detailed classification of different loan type is possible later in the Residential cover pool section. A common national definition may be, for instance, that an interest only loan is a loan where the repayment does not currently include any repayment of the principal.    

    6) Under General issuer data the item Market Capitalisation, does that apply only to issuers whose shares are listed? In our country most or all issuers are subsidiaries of banks or owned by several banks, and consequently not listed on their own.

    The question should be applied to either the issuing bank's market capitalization or that of its (direct or indirect) majority owner.

    FNO was keen to state that this would be included in quarterly reports. We explained that the aim of the CBIC template was to make it easier for investors to access data and compare data. Although the information requested was available throughout quarterly reports, it would not follow our template and be easily comparable. We mentioned that this section was a key feature for some investors, and this is why it was so comprehensive. 

    7) Does the item Total gross new issues of debt securities with a maturity over one year include covered bonds?

    The CBIC intends the total gross new issues of debt securities with a maturity over one year to include covered bonds – as the split between covered bond/secured securities suggests.




    Summary of investors meeting, 31 October 2011 


    This first CBIC meeting was aimed at discussing the practical aspects of the CBIC transparency project, in comparison to the next meetings that will focus on content. Here are some key points of the discussions and action points. 

    Some basic points were agreed:

  • The information should be freely available for all investors.
  • It must be presented in an Excel sheet format
  • Data should be reported on a half-yearly basis and shortly after issuers’ results are published.
  • The CBIC through the ICMA owns the template. ICMA is to draft appropriate disclaimers.
  • The issuers will post a link to the CBIC European transparency standards webpage – and can add or remove the link, should they want to.
  • This link must give access to the CBIC template with information provided by the issuer. Issuers are responsible for the information posted. Additionally issuers may wish to consider giving access to additional information to investors through the link.   
  • The group agreed as well that only issuers using the CBIC template will be allowed to post on the dedicated webpage – to ensure standardisation and comparability of the data received. CBIC members recognise that this could generate additional administrative burden for issuers, but think this step is key to European standardisation and would be a great advantage for the European covered bond market and would eventually lower funding cost.

    It was reiterated that the aim of the project was not to set common definitions for the European covered bond market, but for investors to receive data as well as explanations behind the data so that they are able to perform their own analysis – in a standardised way. It was also emphasised that the CBIC never expected all issuers to fill in all the fields – not all information is relevant for all issuers. Discussions on a bilateral basis with issuers of the blank fields should hopefully help individual issuers and/or national organisations identifying where to enhance transparency levels incrementally. 

    The group also discussed whether a threshold should be set under which issuers will not be able post their data on the CBIC webpage. Although it was agreed that there should be a minimum of policing, and that too little relevant information would not be helpful – there would not be any minimum standards.  
     
    The format of the template was discussed, as well as the possibility of making a template similar to already existing national templates. It was agreed that the CBIC template should be independent from other existing templates. The new CBIC template, taking into account responses and bilateral discussions, will remain in an Excel format.

    Finally the group discussed the fact that the template was comprehensive. It was noted that this was expected as it represented the needs of investors and reflected the fragmentation of the European covered bond market – some investors having a focus on the cover pool, others on the general issuer section. It is for each investor to decide what analysis and focus they will take on the data received from issuers.

    It was decided that the next meeting will be organised with the CFF to discuss their response to the CBIC consultation.  

    To see the original consultation, please click here.

     

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