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The Regulated Covered Bonds Regulations 2008

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PART 1 U.K.INTRODUCTION

Citation, commencement and interpretationU.K.

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 M1;

“the 2006 Act” means the Companies Act 2006 M2;

“the 1989 Order” means the Insolvency (Northern Ireland) Order 1989 M3;

“the Act” means the Financial Services and Markets Act 2000 M4;

“asset” means any property, right, entitlement or interest;

“asset pool” has the meaning given by regulation 3;

“the Authority” means the [F1Financial Conduct Authority];

F2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F3“building society” means a building society incorporated (or deemed to be incorporated) under the Building Societies Act 1986;]

[F4“capital requirements regulation” means Regulation (EU) 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012;]

“centre of main interests” has the same meaning as in Article 3(1) of [F5Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings];

“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;

[F6“deposit” has the meaning given in article 5(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;]

“eligible property” has the meaning given by regulation 2;

[F6“government stock” means stock or bonds of any of the descriptions included in Part 1 of Schedule 11 to the Finance Act 1942;]

“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;

[F6“liquid assets” means—

(a)

government stock or treasury bills issued by Her Majesty's Government in the United Kingdom and other specified government securities which comply with [F7Article 129(1)(a) or (b) of the capital requirements regulation];

(b)

deposits in sterling or another specified currency in an account held in the name of the owner with the issuer or with a specified credit institution which comply with the requirements set out in [F8Article 129(1)(c) of the capital requirements regulation],

and “specified” for the purposes of this definition means specified by the Authority in guidance issued under regulation 42;]

[F6“mixed asset class bond” means a mixed asset class regulated covered bond included in Part one of the register of regulated covered bonds;]

“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;

[F6“reference rate” means a rate used to set the interest rates charged to borrowers in relation to a loan included in the asset pool;]

[F9“registered office” in relation to a building society means its principal office;]

“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;

[F6“the relevant date” is the date on which the Regulated Covered Bonds (Amendment) Regulations 2011 come into force;]

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

[F6“single asset class bond” means a single asset class regulated covered bond included in Part 2 of the register of regulated covered bonds;]

[F6“total principal amounts outstanding” means—

(a)

in relation to loans, the sum of the original amounts advanced on the loan and any further advances, less any repayments of principal made on the loan;

(b)

in relation to other assets, the total amount of principal which remains due to be repaid in relation to the asset.]

F10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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 M5 has the same meaning as in that Article of that Directive.

[F11(4) Any reference in these Regulations to any EU regulation, EU decision or EU tertiary legislation (within the meaning of section 20 of the European Union (Withdrawal) Act 2018) is, unless the contrary intention appears, to be treated as a reference to that EU regulation, EU decision or EU tertiary legislation as it [F12forms part of retained EU law].]

Textual Amendments

Marginal Citations

M5O.J. No L 375, 31.12.85, p.3.

Eligible propertyU.K.

2.—(1) [F13In these Regulations, “eligible property” in relation to a mixed asset class bond or programme means any interest in— ]

[F14(a)subject to paragraph (1B), eligible assets specified in and compliant with the requirements contained in [F15Article 129 of the capital requirements regulation];]

(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;

[F16(f)other liquid assets.]

[F17(1A) In these Regulations, “eligible property” in relation to a single asset class bond or programme means, subject to paragraph (1B), any interest in eligible assets specified in and compliant with the requirements of one (and only one) of the following classes—

(a)class 1 (public sector assets): eligible assets referred to in subparagraph (a) and (b) of [F18Article 129(1) of the capital requirements regulation], assets referred to in sub-paragraph (b), (c), (d) and (e) of paragraph (1) above and other liquid assets;

(b)class 2 (residential mortgage assets): eligible assets referred to in [F19sub-paragraph (d) and (e) of Article 129(1) of the capital requirements regulation], and liquid assets;

(c)class 3 (commercial mortgage assets): eligible assets referred to in [F20sub-paragraph (f) of Article 129(1) of the capital requirements regulation] and liquid assets.

(1B) Assets in the following categories—

(a)exposures to a body which does not qualify for credit quality step 1 on the credit quality assessment scale set out in [F21Part Three, Title II, Chapter 2 of the capital requirements regulations]; F22...

F22(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

shall not be eligible property for the purposes of paragraph (1)(a) or (1A).]

(2) Eligible property (and any relevant security) must be situated in an EEA state, [F23the United Kingdom,] 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 M6;

“the 2001 Act” means the Housing (Scotland) Act 2001 M7;

“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 M8;

“project company” has the meaning given by [F24paragraph 15 of Schedule ZA1 to the 1986 Act or, in Northern Ireland, paragraph 15 of Schedule ZA1 to the 1989 Order;]

“public body” means a body which exercises public functions;

“public-private partnership project” has the meaning given by [F25paragraph 16 of Schedule ZA1 to the 1986 Act or, in Northern Ireland, paragraph 16 of Schedule ZA1 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 M9;

“registered social landlord”—

(a)

in England and Wales, means [F26a private registered provider of social housing or] 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 [F27Part 2 of the Housing (Scotland) Act 2010];

“step-in rights” has the meaning given by [F28paragraph 17 of Schedule ZA1 to the 1986 Act or, in Northern Ireland, paragraph 17 of Schedule ZA1 to the 1989 Order].

(4) Unless otherwise defined, any expression used in this regulation and the [F29capital requirements regulation has the same meaning as in that regulation].

Textual Amendments

Marginal Citations

M72001 ASP 10.

Asset PoolU.K.

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.

OwnerU.K.

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 personU.K.

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 M10.

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

Marginal Citations

PART 2 U.K.THE AUTHORITY

Functions of the AuthorityU.K.

6.—(1) The Authority is to have the functions conferred on it by these Regulations.

(2) The Authority's general functions are—

(a)its functions in relation to the giving of guidance under regulation 42; and

(b)its function of determining the general policy and principles by reference to which it performs particular functions under these Regulations.

(3) In discharging its general functions the Authority must have regard to—

(a)the need to preserve investor confidence in, and the desirability of maintaining the good reputation of, the regulated covered bonds sector in the United Kingdom by the issuance of high quality regulated covered bonds;

(b)the international character of financial services and markets and the desirability of maintaining the competitive position of the United Kingdom;

(c)the need to use its resources in the most efficient and economic way;

(d)the principle that a burden or restriction which is imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction;

(e)the need to minimise the adverse effects on competition that may arise from anything done in the discharge of those functions;

(f)the desirability of facilitating competition in relation to regulated covered bonds.

PART 3 U.K.REGISTRATION

RegistersU.K.

7.—(1) The Authority must maintain—

(a)a register of issuers; and

(b)a register of regulated covered bonds.

[F30(1A) The register of regulated covered bonds shall be divided into two parts.

(1B) Part one shall be a register of mixed asset class regulated covered bonds.

(1C) Part two shall be a register of single asset class regulated covered bonds.

(1D) Any covered bonds or programme of covered bonds included on the register of regulated covered bonds immediately before the relevant date—

(a)shall be included in part two of the register of regulated covered bonds if the issuer certifies to the Authority at least three weeks before the relevant date—

(i)that the eligible property (other than liquid assets) in the asset pool for the covered bond or programme of covered bonds in question all falls within one and only one of the classes specified in regulation 2(1A); and

(ii)that the issuer wishes the regulated covered bond or bonds in question to be single-asset class regulated covered bonds;

(b)shall otherwise be included in part one of the register of regulated covered bonds.

(1E) Where a regulated covered bond is included in part two of the register of regulated covered bonds, the Authority shall record on the register which class of eligible property is contained in the asset pool for that covered bond or programme of covered bonds.]

(2) The Authority must publish the registers in such manner and at such times as it may determine.

Textual Amendments

Applications for registrationU.K.

8.  A person who proposes to issue a covered bond or a programme of covered bonds may apply to the Authority, in such manner as the Authority may direct—

(a)for admission to the register of issuers; or

[F31(b)for the covered bond or the programme of covered bonds to be admitted to—

(i)part one of the register of regulated covered bonds, or

(ii)part two of the register of regulated covered bonds.]

Textual Amendments

Applications for admission to the register of issuersU.K.

9.  Subject to regulation 11, the Authority must grant an application under regulation 8(a) if it is satisfied that the applicant—

(a)has its registered office in the United Kingdom;

(b)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;

(c)will comply with the requirements imposed upon issuers by or under these Regulations; and

(d)complies with any other requirements imposed by the Authority in relation to the application.

Applications for admission to the register of regulated covered bondsU.K.

10.—(1) The Authority may not entertain an application under [F32regulation 8(b)(i) or (ii)] in respect of a covered bond or programme of covered bonds unless it knows—

(a)the identity of the owner of the relevant asset pool;

(b)the assets intended to be included in that asset pool; and

(c)the arrangements to be made under regulation 17.

(2) The Authority may grant an application under regulation 8(b) if it is satisfied that—

(a)the applicant is an issuer which is admitted to the register of issuers;

(b)the applicant and the owner of the relevant asset pool will comply with the requirements imposed upon them by or under these Regulations; and

(c)the applicant complies with any other requirements imposed by the Authority in relation to the application.

[F33(3) The Authority may only grant an application under regulation 8(b)(ii) if it is satisfied that the eligible property (other than liquid assets) in the asset pool all falls within one and only one of the classes specified in regulation 2(1A).]

Textual Amendments

Refusal of applications for registrationU.K.

11.  An application under regulation 8 may be refused if, for any reason relating to—

(a)in the case of an application under regulation 8(a), the applicant; or

(b)in the case of an application under regulation 8(b), the issuer, the owner of the relevant asset pool or the quality of that asset pool,

the Authority considers that granting it would be detrimental to the interests of investors in regulated covered bonds or to the maintenance of the good reputation of the regulated covered bond sector in the United Kingdom.

Applications: supplementaryU.K.

12.—(1) The applicant must provide any information which the Authority requires in connection with an application under regulation 8 in such form, and verified in such manner, as the Authority may direct.

(2) At any time after receiving an application under regulation 8 and before determining it, the Authority may require the applicant to provide such further information as it reasonably considers necessary to enable it to determine the application.

(3) Different directions may be given, or requirements imposed, by the Authority with respect to different applications or categories of application.

Decision on the applicationU.K.

13.—(1) The Authority must notify the applicant of its decision on an application under regulation 8—

(a)before the end of the period of six months beginning with the date on which the application is received; or

(b)if within that period the Authority has required the applicant to provide further information in connection with the application, before the end of the period of six months beginning with the date on which that information is provided.

(2) The applicant may withdraw its application by giving the Authority written notice at any time before the Authority determines it.

(3) If the Authority decides to grant an application under regulation 8, it must give the applicant written notice of its decision.

(4) If the Authority proposes to refuse an application under regulation 8, it must give the applicant a warning notice.

(5) The Authority must, having considered any representations made in response to the warning notice—

(a)if it decides to refuse the application under regulation 8, give the applicant a decision notice; or

(b)if it grants the application, give the applicant written notice of its decision.

(6) If the Authority decides to refuse an application under regulation 8, the applicant may refer the matter to the [F34Upper Tribunal].

Textual Amendments

Admission to the registersU.K.

14.—(1) If the Authority decides to grant an application under regulation 8 it must, within seven days of the date on which it gave written notice under regulation 13(3) or (5)(b), admit—

(a)the applicant to the register of issuers; or

[F35(b)the covered bond or the programme of covered bonds to—

(i)part one of the register of regulated covered bonds, in the case of an application under regulation 8(b)(i); or

(ii)part two of the register of regulated covered bonds in the case of an application under regulation 8(b)(ii).]

(2) The Authority may remove a regulated covered bond from the register of regulated covered bonds only after the expiry of the whole period of validity of that bond.

Textual Amendments

PART 4U.K.ISSUERS

Acting without registrationU.K.

15.—(1) A person may not issue, or purport to issue, a regulated covered bond unless—

(a)it is admitted to the register of issuers; and

[F36(b)the bond is admitted to part one or part two of the register of regulated covered bonds.]

(2) A person which has been removed from the register of issuers may not make any further issue under a programme of covered bonds which has been admitted to the register of regulated covered bonds.

(3) Contravention of the prohibition in paragraph (1) or (2) by a person is a contravention of a requirement imposed on it by these Regulations, but does not—

(a)make any transaction void or unenforceable; or

(b)give rise to any right of action for breach of statutory duty.

Textual Amendments

Sums derived from the issue of regulated covered bondsU.K.

16.  An issuer must lend sums derived from the issue of a regulated covered bond to the owner of the relevant asset pool.

General requirementsU.K.

17.—(1) An issuer of a regulated covered bond must enter into arrangements with the owner of the relevant asset pool for the maintenance and administration of that pool.

(2) The arrangements must provide for the following requirements—

(a)a record is kept of each asset in the asset pool;

(b)the asset pool is, during the whole period of validity of the regulated covered bond, capable of covering—

(i)claims attaching to the bond; and

(ii)sums required for the maintenance, administration and winding up of the asset pool;

(c)there is timely payment of claims attaching to the bond to the regulated covered bond holder; F37...

(d)the asset pool is of sufficient quality to give investors confidence that in the event of the failure of the issuer there will be a low risk of default in the timely payment by the owner of claims attaching to the bond;

[F38(e)the eligible property in the asset pool of a single asset class bond consists only of eligible property of the same class as the eligible property included in the asset pool of the regulated covered bond when it was registered;

(g)the total amount of interest payable in the period of twelve months following any given date in respect of eligible property in the asset pool is not less than the interest which would be payable in relation to the regulated covered bonds issued under the programme in that period, assuming that the reference rates applicable on the given date do not change in that period.

(f)the total principal amounts outstanding in respect of eligible property in the asset pool is more than 108% of the total principal amounts outstanding in relation to the bonds to which the asset pool relates; and]

[F39(2A)  In determining whether the requirement in subparagraph (e) of paragraph (2) is satisfied, no account shall be taken of eligible property which is liquid assets.

(2B)  Subject to paragraph (2C), in determining whether the requirement in subparagraph (f) of paragraph (2) is satisfied, the total principal amounts outstanding in respect of eligible property which is liquid assets shall not exceed an amount which is the sum of—

(a)8% of the total principal amounts outstanding in relation to bonds with a maturity of one year or more, and

(b)100% of the total principal amounts outstanding in relation to bonds with a maturity of less than one year.

(2C)  In applying paragraph (2B) in relation to the asset pool of a single asset class bond which is comprised only of assets within class 1 as specified in regulation 2(1A)(a), no account shall be taken of eligible property which is within paragraph (a) of the definition of “liquid assets” in regulation 1(2).

(2D) In ensuring that the arrangements satisfy the requirements in subparagraphs (f) and (g) of paragraph (2), the issuer may take account of any hedging agreements which it has entered into in relation to the assets in the asset pool and the regulated covered bonds.

(2E) Nothing in this regulation shall prevent the Authority directing an issuer to observe additional requirements in relation to its asset pool.]

(3) This regulation does not apply in the event of the insolvency of the issuer.

Textual Amendments

[F40Asset pool monitorU.K.

17A.—(1) An issuer of a regulated covered bond must appoint an asset pool monitor for each asset pool maintained for the regulated covered bonds it has issued.

(2) The person appointed as asset pool monitor must—

(a)be eligible for appointment as a statutory auditor of the issuer under Part 42 of the Companies Act 2006; and

(b)not be disqualified from acting as a statutory auditor of the issuer by section 1214 of that Act (independence requirement).

(3) The asset pool monitor shall—

(a)inspect the compliance of the issuer with the requirements in regulations 16 and 17, and in particular—

(i)the extent to which the asset pool satisfies the conditions set out in regulation 17(2); and

(ii)the accuracy of the records kept in relation to each asset in the asset pool,

once every twelve months; and

(b)prepare an annual report in accordance with guidance issued by the Authority on the steps the issuer has taken to comply with regulations 16 and 17, and on the quality of the assets in the asset pool.

(4) Guidance issued to the asset pool monitor of an individual issuer under paragraph (3)(b) may identify particular issues to be addressed in the report for that issuer.

(5) A copy of the report prepared by the asset pool monitor shall be delivered to the Authority at such time as the Authority may direct.

(6) If it appears to the asset pool monitor that the issuer has failed to comply with the requirements set out in regulation 17, or that the issuer has not provided the monitor with all the information and explanations to which the monitor is entitled under this regulation, the asset pool monitor shall report in writing on that fact to the Authority as soon as possible.

(7) The asset pool monitor—

(a)has a right of access at all times to all books, accounts and vouchers of the issuer and of the owner of the relevant asset pool which are related to that asset pool, in whatever form they are held, and

(b)may require any of the persons referred to in paragraph (8) to provide such information and explanations as the asset pool monitor thinks necessary for the performance of the monitor's duties under this regulation.

(8) The persons referred to in paragraph (7)(b) are—

(a)any officer or employee of the issuer or the owner;

(b)any person holding or accountable for any of the books, accounts or vouchers of the issuer or the owner;

(c)any person who fell within either sub-paragraph (a) or (b) at a time to which the information or explanations required by the asset pool monitor relates or relate.

(9) A statement made by a person in response to a requirement under this regulation may not be used in evidence against him in criminal proceedings, except proceedings for an offence under section 398 of the Act in connection with the giving of information pursuant to requirements imposed by or under these Regulations.

(10) On the insolvency of the issuer of a regulated covered bond—

(a)the asset pool monitor appointed by the issuer shall continue to act as asset pool monitor for the owner of the relevant asset pool;

(b)any subsequent appointment of an asset pool monitor required under paragraph (1) of this regulation shall be made by the owner of the relevant asset pool;

(c)references in paragraphs (2), (3), (4) and (6) to the issuer shall be understood as references to the owner of the relevant asset pool; and

(d)references in paragraph (3) to regulations 16 and 17 shall be understood as references to regulation 24.]

Textual Amendments

Notification requirementsU.K.

18.—(1) An issuer must give the Authority such information in respect of—

(a)any regulated covered bond it issues;

(b)any series of covered bonds issued or proposed to be issued under a regulated covered bond;

(c)the assets in the relevant asset pool;

(d)the steps it has taken to comply with regulation 16 or 17;

as the Authority may direct.

(2) The issuer of a regulated covered bond must inform the Authority if at any time any of the requirements specified in regulation 17(2) are not, or are not likely to be, satisfied in respect of the relevant asset pool.

(3) The information required under paragraphs (1) and (2) must be given at such times, in such form and verified in such manner, as the Authority may direct.

[F41(4) Any information required under paragraphs (1) and (2), or any part of that information, must, if the Authority so directs, be published as directed by the Authority.

(5) Nothing in paragraph (4) entitles the Authority to direct publication of information which the issuer would be entitled to refuse to disclose in court proceedings on grounds of legal professional privilege.]

Textual Amendments

Change of issuerU.K.

19.—(1) An issuer of a regulated covered bond may transfer the benefits and obligations accruing to or falling upon it under all contracts relating to the relevant asset pool to another person only if that person has been admitted to the register of issuers.

(2) Where a transfer takes place in accordance with paragraph (1), that person shall be an issuer of that regulated covered bond for the purposes of these Regulations.

Material changes to the regulated covered bondU.K.

20.—(1) Where an issuer of a regulated covered bond proposes to make a material change to the contractual terms of the bond, it must give the Authority such—

(a)notice of the proposed change; and

(b)information in respect of the proposed change;

as the Authority may direct.

(2) The information required under paragraph (1) must be given at such time, in such form and verified in such manner, as the Authority may direct.

(3) If it appears to the Authority that the proposed change will not prevent the issuer and owner of the relevant asset pool from continuing to comply with the requirements imposed on them by or under these Regulations, it must give the issuer written notice of its decision to approve the change before the end of a period of 3 months beginning with the date on which the information required under paragraph (1) is provided.

(4) If it appears to the Authority that the proposed change may prevent the issuer or the owner of the relevant asset pool from complying with the requirements imposed upon them by or under these Regulations, it may decide not to approve the change and give the issuer a decision notice.

(5) If the Authority proposes to give a decision notice under paragraph (4), it must give the issuer a warning notice before the end of a period of 3 months beginning with the date on which the information required under paragraph (1) is provided.

(6) The Authority must, having considered any representations made in response to the warning notice—

(a)if it decides to do so, give a decision notice under paragraph (4); or

(b)if it decides not to give a decision notice, give the issuer a notice of discontinuance and written notice of its decision to approve the change.

(7) If the Authority gives a decision notice under paragraph (4), the issuer may refer the matter to the [F42Upper Tribunal].

(8) The issuer may not make the proposed change before it has received a written notice from the Authority approving the change.

Textual Amendments

PART 5 U.K.OWNERS

ProhibitionU.K.

21.—(1) A person may not be an owner unless it—

(a)is a company or limited liability partnership; and

(b)has its registered office and centre of main interests in the United Kingdom.

(2) Regulation 15(3) applies to a contravention of the prohibition in paragraph (1) as it applies to a contravention of the prohibition in regulation 15(1) or (2).

[F43(3) In paragraph (1)—

“company” has the meaning given by section 735 of the Companies Act 1985 (“company” etc) and article 3 of the Companies (Northern Ireland) Order 1986 (“company” etc) until the coming into force of section 1 of the 2006 Act (companies) when it will have the meaning given by that section;

“limited liability partnership” has the meaning given —

(a)

in relation to Great Britain, by section 1 of the Limited Liability Partnerships Act 2000 (limited liability partnerships); and

(b)

in relation to Northern Ireland, by section 1 of the Limited Liability Partnerships Act (Northern Ireland) 2002 (limited liability partnerships) until the coming into force of section 1286 of the 2006 Act (extension of GB enactments relating to certain other forms of business organisation), when it will have the meaning given by section 1 of the Limited Liability Partnerships Act 2000.]

Textual Amendments

Sums derived from the issue of regulated covered bondsU.K.

[F4422.—[F45(1)]  The owner of the relevant asset pool must, so far as necessary for the purpose of complying with arrangements made pursuant to regulation 23 or 24(1)(a), use the sums lent to it by the issuer of a regulated covered bond to acquire eligible property.

[F46(2) Any eligible property acquired for the asset pool of a single asset class bond under paragraph (1) must be eligible property of the same class as the eligible property included in the asset pool of the regulated covered bond when it was registered.]]

Textual Amendments

F45Reg. 22(1): reg. 22 renumbered as reg. 22(1) (1.1.2013) by The Regulated Covered Bonds (Amendment) Regulations 2011 (S.I. 2011/2859), regs. 1, 2(12)(a)

Requirements relating to the asset poolU.K.

23.—(1) The owner of the relevant asset pool must enter into arrangements with the issuer of a regulated covered bond for the maintenance and administration of the asset pool.

(2) The arrangements must provide for the requirements specified in regulation 17(2).

24.—(1) On the insolvency of the issuer of a regulated covered bond, the owner of the relevant asset pool must—

(a)make arrangements for the maintenance and administration of the asset pool which provide for the following requirements—

(i)a record is kept of each asset in the asset pool;

(ii)the asset pool is capable of covering—

(aa)claims attaching to the bond; and

(bb)sums required for the maintenance, administration and winding up of the asset pool;

(iii)there is timely payment of claims attaching to the bond to the regulated covered bond holder;

[F47(iv)the asset pool of a single asset class bond consists only of eligible property of the same class as the assets included in the asset pool of the regulated covered bond when it was registered.]

(b)give the Authority such information in respect of—

(i)the composition of the asset pool; and

(ii)the steps it has taken to comply with sub-paragraph (a);

as the Authority may direct; and

(c)inform the Authority if at any time any of the requirements set out in sub-paragraph (a)(ii) or (iii) are not, or are not likely to be, satisfied.

(2) The information required under paragraph (1)(b) and (c) must be given at such times, in such form and verified in such manner, as the Authority may direct.

[F48(2A) In determining whether the requirement in paragraph (1)(a)(iv) is satisfied, no account shall be taken of eligible property which is liquid assets.

(2B) Nothing in this regulation shall prevent the Authority directing the owner to observe additional requirements in relation to its asset pool.]

Textual Amendments

Change of ownerU.K.

25.—(1) Where a regulated covered bond has been issued and the owner of the relevant asset pool proposes to transfer ownership of the asset pool and the benefits and obligations accruing to or falling upon it under all contracts relating to the asset pool to another person, it must make arrangements to give the Authority such—

(a)notice of the proposed change of ownership; and

(b)information in respect of the proposed new owner;

as the Authority may direct.

(2) The information required under paragraph (1) must be given at such time, in such form and verified in such manner, as the Authority may direct.

(3) If it appears to the Authority that the proposed owner will comply with the requirements imposed by arrangements made pursuant to regulation 23 or, as the case may be, 24(1)(a) it must give the owner written notice of its decision to approve the change before the end of a period of 3 months beginning with the date on which the information required under paragraph (1) is provided.

(4) If it appears to the Authority that the proposed owner will be unable to comply with any of those requirements it may decide not to approve the change and give the owner a decision notice.

(5) If the Authority proposes to give a decision notice under paragraph (4), it must give the owner a warning notice before the end of a period of 3 months beginning with the date on which the information required under paragraph (1) is provided.

(6) The Authority must, having considered any representations made in response to the warning notice—

(a)if it decides to do so, give a decision notice under paragraph (4); or

(b)if it decides not to give a decision notice, give the owner a notice of discontinuance and written notice of its decision to approve the change.

(7) If the Authority gives a decision notice under paragraph (4), the owner may refer the matter to the [F49Upper Tribunal].

(8) The owner may not transfer the asset pool to a proposed new owner before it has received a written notice from the Authority approving the change.

Textual Amendments

Transfer of titleU.K.

26.  Where an issuer of a regulated covered bond or a connected person holds any interest in an asset in the relevant asset pool on behalf of the owner, a liquidator or administrator appointed to wind up that issuer or connected person must, as soon as reasonably practicable, transfer or assist in the transfer of that interest to the owner.

PART 6 U.K.PRIORITY OF PAYMENT

Priority in a winding upU.K.

27.—(1) Subject to—

(a)section 115 of the 1986 Act (expenses of voluntary winding up) or, in Northern Ireland, article 100 of the 1989 Order (expenses of voluntary winding up); and

(b)the priority of the expenses of the winding up in a compulsory liquidation;

where an owner is wound up, the claims of relevant persons shall be paid from the relevant asset pool in priority to all other creditors.

(2) “Relevant persons” are—

(a)regulated covered bond holders;

(b)persons providing services for the benefit of those bond holders;

(c)the counter-parties to hedging instruments which are incidental to the maintenance and administration of the asset pool or to the terms of the regulated covered bond; and

(d)persons (other than the issuer) providing a loan to the owner to enable it to satisfy the claims of the persons mentioned in sub-paragraph (a), (b) or (c).

(3) The claims of the persons mentioned in paragraph (2)(b), (c) and (d) may rank equally with, but not in priority to, the claims of the persons mentioned in paragraph (2)(a).

Realisation of a chargeU.K.

28.—(1) Subject to regulation 29, if—

(a)any asset comprised in the asset pool is charged as security for claims in priority to any charge over that asset granted to secure the claims of relevant persons; and

(b)the charge which has priority is realised at any time when the owner is not in the course of being wound up;

the proceeds of the realisation of that charge must, after payment of the expenses referred to in regulation 29 and any other expenses relating to that charge, be first applied to satisfy the claims of relevant persons at such time as those claims fall due for payment.

(2) Subject to regulation 29, if—

(a)any asset comprised in the asset pool is charged as security for several claims;

(b)any agreement between the creditors of that charge gives priority to the claims of any person above the claims of the relevant persons; and

(c)that charge is realised at any time when the owner is not in the course of being wound up;

the proceeds of the realisation of that charge must, after payment of the expenses referred to in regulation 29 and any other expenses relating to that charge, be first applied to satisfy the claims of the relevant persons at such time as those claims fall due for payment.

[F50(3) For the purposes of paragraphs (1) and (2) the claims of the persons mentioned in regulation 27(2)(b), (c) and (d) may rank equally with, but not in priority to, the claims of the persons mentioned in regulation 27(2)(a).]

Textual Amendments

ExpensesU.K.

[F5129.—(1) Disbursements made by a liquidator, provisional liquidator, administrator, administrative receiver, receiver or manager of the owner in respect of costs which–

(a)are incurred after the commencement of any winding up, administration, administrative receivership or receivership; and

(b)relate to any of the persons mentioned in paragraph (2);

shall be expenses of the winding up, administration, administrative receivership or receivership, as the case may be, and shall rank equally among themselves in priority to all other expenses.

(2) The persons referred to in paragraph (1)(b) are–

(a)persons providing services for the benefit of regulated covered bond holders;

(b)the counter-parties to hedging instruments which are incidental to the maintenance and administration of the asset pool or to the terms of the regulated covered bonds; and

(c)persons (other than the issuer) providing a loan to the owner to enable it to meet the claims of regulated covered bond holders or pay costs which relate to persons falling within sub-paragraph (a) or (b).]

Textual Amendments

PART 7U.K.ENFORCEMENT

Authority's power to give directionsU.K.

30.—(1) If it appears to the Authority that a person has failed, or is likely to fail, to comply with any requirement imposed on it by or under these Regulations, the Authority may direct that person to take specified steps for the purpose of securing its compliance with any such requirement.

(2) If it appears to the Authority that an owner has failed, or is likely to fail, to comply with any requirement imposed on it by or under these Regulations, the Authority may direct the winding up of that person.

(3) A direction under this regulation is enforceable, on the application of the Authority, by an injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988 M11(restoration of possession and specific performance).

Marginal Citations

Removal from the registerU.K.

31.—(1) The Authority may remove an issuer from the register of issuers—

(a)at the issuer's request;

(b)with its consent; or

(c)if it appears to the Authority that the issuer is failing, or has failed, to comply with any requirement imposed on it by or under these Regulations.

(2) But these Regulations (apart from regulation 15(2)) apply to a person which has been removed from the register of issuers as if it were still a person which is admitted to the register.

Directions and revocation: procedureU.K.

32.—(1) Before—

(a)giving a direction under regulation 30; or

(b)removing an issuer from the register of issuers under regulation 31(1)(c),

the Authority must give a warning notice to the person concerned.

(2) If, having considered any representations, the Authority decides to—

(a)make the direction; or

(b)remove the issuer from the register of issuers,

the Authority must give that person a decision notice.

(3) If the Authority decides not to—

(a)make a direction; or

(b)remove the issuer from the register of issuers,

it must give that person written notice of its decision.

(4) If the Authority decides to—

(a)make a direction; or

(b)remove the issuer from the register of issuers,

the person concerned may refer the matter to the [F52Upper Tribunal].

Textual Amendments

Powers of the courtU.K.

33.—(1) If, on the application of the Authority, the court is satisfied that—

(a)there is a reasonable likelihood that a person will contravene a requirement imposed on it by or under these Regulations; or

(b)a person has contravened any such requirement and there is a reasonable likelihood that the contravention will continue or be repeated,

the court may make an order restraining (or in Scotland an interdict prohibiting) the contravention.

(2) If, on the application of the Authority, the court is satisfied that—

(a)a person has contravened a requirement imposed on it by or under these Regulations; and

(b)there are steps which could be taken for remedying the contravention;

the court may make an order requiring that person, and any other person who appears to have been knowingly concerned in the contravention, to take such steps as the court may direct to remedy it.

(3) The jurisdiction conferred by this regulation is exercisable by the High Court, the Court of Session and the Northern Ireland High Court.

(4) In paragraph (2), references to remedying a contravention include references to mitigating its effect.

Financial penaltiesU.K.

34.—(1) The Authority may impose a penalty of such amount as it considers appropriate on a person which has contravened a requirement imposed on it by or under these Regulations.

(2) A penalty imposed under this regulation is payable to the Authority.

(3) The Authority may not take action against a person under this regulation after the end of the period of two years beginning with the first day on which it knew of the contravention unless proceedings against that person, in respect of the contravention, were begun before the end of that period.

(4) For the purposes of paragraph (3)—

(a)the Authority is to be treated as knowing of a contravention if it has information from which the contravention can reasonably be inferred; and

(b)proceedings against a person in respect of a contravention are to be treated as begun when a warning notice is given to it under regulation 35.

35.—(1) Where the Authority proposes to impose a penalty under regulation 34, it must give the person concerned a warning notice.

(2) The warning notice must state the amount of the proposed penalty and the Authority's reasons for imposing it.

(3) If, having considered any representations made in response to the warning notice, the Authority decides to impose a penalty under regulation 34, it must without delay give the person concerned a decision notice.

(4) The decision notice must state the amount of the penalty.

(5) If the Authority decides to impose a penalty on a person under regulation 34, that person may refer the matter to the [F53Upper Tribunal].

Textual Amendments

36.  Sections 210 (statements of policy) and 211 (statements of policy: procedure) of the Act are to apply in respect of the imposition of penalties under these Regulations and the amount of such penalties as they apply in respect of the imposition of penalties under Part 14 of the Act (disciplinary measures) and the amount of penalties under that Part of that Act.

[F5436A.—(1) The Authority must in respect of each of its financial years pay to the Treasury any amounts received by it during the year by way of penalties imposed under regulation 34.

(2) The Treasury may give directions to the Authority as to how the Authority is to comply with its duty under paragraph (1).

(3) The directions may in particular—

(a)specify the time when any payment is required to be made to the Treasury, or

(b)require the Authority to provide the Treasury at specified times with information relating to penalties that the Authority has imposed under regulation 34.

(4) The Treasury must pay into the Consolidated Fund any sums received by them under this regulation.]

Textual Amendments

[F5537.  Paragraph 19 (penalties) of Schedule 1ZA applies for the purposes of these Regulations as it applies for the purposes of the Act but as if for “this Act” there were substituted “the Regulated Covered Bonds Regulations 2008.]

Textual Amendments

Offence of misleading the AuthorityU.K.

38.—(1) Subsections (1) and (3) of section 398 [F56(misleading FCA or PRA)] of the Act are to apply in respect of requirements imposed by or under these Regulations as they apply in respect of requirements imposed by or under the Act.

[F57(1A) For the purposes of section 398 of the Act, as applied to requirements imposed by or under these Regulations, information provided to the asset pool monitor in response to a requirement under regulation 17A(7) shall be treated as being given to the Authority.]

(2) Section 400 (offences by bodies corporate etc) and subsections (2), (3), (5) and (6) of section 401 (proceedings for offences) of the Act are to apply for the purposes of paragraph (1) as they apply for the purposes of the Act.

Textual Amendments

PART 8U.K.THE [F58UPPER TRIBUNAL]

Textual Amendments

Functions of the [F59Upper Tribunal]U.K.

39.  The [F59Upper Tribunal] is to have the functions conferred on it by these Regulations.

Textual Amendments

Hearings and appealsU.K.

F6040.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

PART 9 U.K.MISCELLANEOUS

Notification of the CommissionU.K.

F6141.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

GuidanceU.K.

42.—(1) The Authority may give guidance consisting of such information and advice as it considers appropriate—

(a)with respect to the operation of these Regulations;

(b)with respect to any matters relating to functions of the Authority under these Regulations;

(c)with respect to any other matters about which it appears to the Authority to be desirable to give information or advice.

[F62(2) The Authority must give guidance consisting of—

(a)information as to which government securities, credit institutions and currencies are specified for the purposes of the definition of “liquid assets” in regulation 1(2);

(b)information and advice about the quality of an asset pool for the purposes of the requirement specified in regulation 17(2)(d) and the manner in which it will assess the issuer's and owner's compliance with that requirement;

(c)information and advice about the contents of the annual report required for the purposes of regulation 17A(3)(b).]

(3) Guidance given under paragraph (2) must include information and advice on the factors which the Authority will take into account, such as—

(a)fluctuations in the value of assets and the income from assets;

(b)fluctuations in the value of interest and exchange rates;

(c)geographical concentration and diversification of assets in the asset pool;

(d)the risk of loss if a person fails to perform its obligations, or fails to perform them in a timely manner; and

(e)counterparty credit risk, in particular, in relation to any interest rate, currency or other hedging instruments relating to the asset pool.

[F63(4) Subject to paragraph (5) and the modification in paragraph (4A), if the Authority proposes to give guidance under this regulation to issuers or owners generally, or to a class of issuer or owner, subsections (1)(b), (2)(e) and (3) of section 138I of the Act (consultation by the FCA) apply to the proposed guidance as they apply to proposed rules made under the Act, unless the Authority considers that the delay in complying with them would be prejudicial to the interests of regulated covered bond holders.

(4A) For the purpose of paragraph (4) section 138I of the Act is to be treated as if in subsection (1)(b) “after doing so” were omitted.]

(5) Paragraph (4) shall not apply to the first guidance given pursuant to paragraph (2).

(6) The Authority may—

(a)publish its guidance;

(b)offer copies of its published guidance for sale at a reasonable price; and

(c)if it gives guidance in response to a request made by any person, make a reasonable charge for that guidance.

Textual Amendments

Disclosure of informationU.K.

43.—(1) Sections 348 (restrictions on disclosure of confidential information by [F64FCA, PRA]), 349 (exceptions from section 348) and 352 (offences) of the Act apply to confidential information disclosed under these Regulations as they apply to confidential information under the Act.

(2) In paragraph (1) “confidential information” has the meaning given by section 348 of the Act.

Textual Amendments

Warning notices and decision noticesU.K.

44.  Part 26 of the Act (notices) is to apply for the purposes of these Regulations as it applies for the purposes of the Act.

Authority's exemption from liability in damagesU.K.

45.  The functions of the Authority under these Regulations are to be treated for the purposes of [F65paragraph 25 (exemption from liability in damages) of Part 4 of Schedule 1ZA] to the Act as functions conferred on the Authority under that Act.

Textual Amendments

Modifications of primary and secondary legislationU.K.

46.  The Schedule (which modifies primary and secondary legislation) has effect.

Dave Watts

Steve McCabe

Two of the Lords Commissioners of Her Majesty's Treasury

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