The Regulated Covered Bonds (Amendment) Regulations 2008

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations, which come into force on [ July] 2008, amend the Regulated Covered Bonds Regulations 2008 (SI 2008/346) (the “principal Regulations”). The principal Regulations provide a new legislative regime for covered bonds in the UK, implementing in particular Article 22(4) of Council Directive 85/611/EC of 20 December 1985 on the co-ordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (which Article was inserted by Directive 2001/108/EC of 21 January 2002). A Transposition Table setting out how Article 22(4) (and relevant provisions of other Directives) are transposed into UK law is available from the Financial Stability and Regulatory Policy Team, HM Treasury, I Horseguards Road, London, SW1A 2HQ. The Transposition Table is also available on HM Treasury’s website (www.hm-treasury.gov.uk).

Regulation 2(2) provides that in the case of a building society references to “registered office” mean its principal office.

Regulation 2(3) makes minor amendments to the definitions of “company” and “limited liability partnership”.

Regulation 2(4) provides that the owner of the relevant asset pool must use the sums lent to it by the issuer of the covered bond to acquire eligible property to the extent necessary to comply with certain requirements set out in the principal Regulations, including the requirement that the asset pool is capable of covering claims attaching to the bond.

Regulation 2(5) clarifies how the claims of “relevant persons” as defined by regulation 27(2) of the principal Regulations should rank if a charge relating to an asset in the asset pool is realised.

Regulation 2(6) specifies which payments should be regarded as expenses of the relevant insolvency process.

Regulation 2(7) provides that rule 2.39B of the Insolvency (Scotland) Rules 1986 applies to an owner subject to the provisions of regulation 29 of the principal Regulations and that article 53 of the Insolvency (Northern Ireland) Order 1989 (No.2405 (N.I. 19) does not apply to an owner. Minor drafting changes are made to paragraph 9(2) of the Schedule to the principal Regulations.

A full impact assessment was produced for the principal Regulations and was deposited in both Houses of Parliament. It is available either at the above address or on HM Treasury’s website.