II 

112TH CONGRESS 

1ST SESSION S. 1835 

To establish standards for covered bond programs and a covered bond 

regulatory oversight program, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 9, 2011 

Mrs. HAGAN (for herself, Mr. CORKER, Mr. SCHUMER, and Mr. CRAPO) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To establish standards for covered bond programs and a 

covered bond regulatory oversight program, and for other 

purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘United States Covered 

5 Bond Act’’. 

6 SEC. 2. DEFINITIONS. 

7 For purposes of this Act, the following definitions 

8 shall apply: 


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1 (1) ANCILLARY ASSET.—The term ‘‘ancillary 

2 asset’’ means— 

3 (A) any interest rate or currency swap as4 sociated with 1 or more eligible assets, sub5 stitute assets, or other assets in a cover pool; 

6 (B) any credit enhancement or liquidity ar7 rangement associated with 1 or more eligible 

8 assets, substitute assets, or other assets in a 

9 cover pool; 

10 (C) any guarantee, letter-of-credit right, or 

11 other secondary obligation that supports any 

12 payment or performance of 1 or more eligible 

13 assets, substitute assets, or other assets in a 

14 cover pool; and 

15 (D) any proceeds of, or other property in16 cident to, 1 or more eligible assets, substitute 

17 assets, or other assets in a cover pool. 

18 (2) CORPORATION.—The term ‘‘Corporation’’ 

19 means the Federal Deposit Insurance Corporation. 

20 (3) COVER POOL.—The term ‘‘cover pool’’ 

21 means a dynamic pool of assets that is comprised 

22 of— 

23 (A) in the case of any eligible issuer de24 scribed in subparagraph (A), (B), (C), (D), or 

25 (E) of paragraph (9)— 


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1 (i) 1 or more eligible assets from a 

2 single eligible asset class; and 

3 (ii) 1 or more substitute assets or an4 cillary assets; and 

5 (B) in the case of any eligible issuer de6 scribed in paragraph (9)(F)— 

7 (i) the covered bonds issued by each 

8 sponsoring eligible issuer; and 

9 (ii) 1 or more substitute assets or an10 cillary assets. 

11 (4) COVERED BOND.—The term ‘‘covered 

12 bond’’ means any recourse debt obligation of an eli13 gible issuer that— 

14 (A) has an original term to maturity of not 

15 less than 1 year; 

16 (B) is secured by a perfected security in17 terest in or other perfected lien on a cover pool 

18 that is owned directly or indirectly by the issuer 

19 of the obligation; 

20 (C) is issued under a covered bond pro21 gram that has been approved by the applicable 

22 covered bond regulator; 

23 (D) is identified in a register of covered 

24 bonds that is maintained by the Secretary; and 


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1 (E) is not a deposit (as defined in section 

2 3(l) of the Federal Deposit Insurance Act (12 

3 U.S.C. 1813(l))). 

4 (5) COVERED BOND PROGRAM.—The term 

5 ‘‘covered bond program’’ means any program of an 

6 eligible issuer under which, on the security of a sin7 gle cover pool, 1 or more series of covered bonds 

8 may be issued. 

9 (6) COVERED BOND REGULATOR.—The term 

10 ‘‘covered bond regulator’’ means— 

11 (A) for any eligible issuer that is subject to 

12 the jurisdiction of an appropriate Federal bank13 ing agency (as defined in section 3(q) of the 

14 Federal Deposit Insurance Act (12 U.S.C. 

15 1813(q))), the appropriate Federal banking 

16 agency; 

17 (B) for any eligible issuer that is described 

18 in paragraph (9)(F), that is not subject to the 

19 jurisdiction of an appropriate Federal banking 

20 agency, and that is sponsored by only 1 eligible 

21 issuer, the covered bond regulator for the spon22 sor; 

23 (C) for any eligible issuer that is described 

24 in paragraph (9)(F), that is not subject to the 

25 jurisdiction of an appropriate Federal banking 


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1 agency, and that is sponsored by more than 1 

2 eligible issuer, the covered bond regulator for 

3 the sponsor whose covered bonds constitute the 

4 largest share of the cover pool of the issuer; 

5 and 

6 (D) for any other eligible issuer that is not 

7 subject to the jurisdiction of an appropriate 

8 Federal banking agency, the Board of Gov9 ernors of the Federal Reserve System. 

10 (7) ELIGIBLE ASSET.—The term ‘‘eligible 

11 asset’’ means— 

12 (A) in the case of the residential mortgage 

13 asset class— 

14 (i) any first-lien mortgage loan that is 

15 secured by 1-to-4 family residential prop16 erty; 

17 (ii) any mortgage loan that is insured 

18 under the National Housing Act (12 

19 U.S.C. 1701 et seq.); and 

20 (iii) any loan that is guaranteed, in21 sured, or made under chapter 37 of title 

22 38, United States Code; 

23 (B) in the case of the commercial mort24 gage asset class, any commercial mortgage loan 

25 (including any multifamily mortgage loan); 


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1 (C) in the case of the public sector asset 

2 class— 

3 (i) any security issued by a State, mu4 nicipality, or other governmental authority; 

5 (ii) any loan made to a State, munici6 pality, or other governmental authority; 

7 and 

8 (iii) any loan, security, or other obli9 gation that is insured or guaranteed, in 

10 full or substantially in full, by the full faith 

11 and credit of the United States Govern12 ment (whether or not such loan, security, 

13 or other obligation is also part of another 

14 eligible asset class); 

15 (D) in the case of the auto asset class, any 

16 auto loan or lease; 

17 (E) in the case of the student loan asset 

18 class, any student loan (whether guaranteed or 

19 nonguaranteed); 

20 (F) in the case of the credit or charge card 

21 asset class, any extension of credit to a person 

22 under an open-end credit plan; 

23 (G) in the case of the small business asset 

24 class, any loan that is made or guaranteed 


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1 under a program of the Small Business Admin2 istration; and 

3 (H) in the case of any other eligible asset 

4 class, any asset designated by the Secretary, by 

5 rule and in consultation with the covered bond 

6 regulators, as an eligible asset for purposes of 

7 such class. 

8 (8) ELIGIBLE ASSET CLASS.—The term ‘‘eligi9 ble asset class’’ means— 

10 (A) a residential mortgage asset class; 

11 (B) a commercial mortgage asset class; 

12 (C) a public sector asset class; 

13 (D) an auto asset class; 

14 (E) a student loan asset class; 

15 (F) a credit or charge card asset class; 

16 (G) a small business asset class; and 

17 (H) any other eligible asset class des18 ignated by the Secretary, by rule and in con19 sultation with the covered bond regulators. 

20 (9) ELIGIBLE ISSUER.—The term ‘‘eligible 

21 issuer’’ means— 

22 (A) any insured depository institution and 

23 any subsidiary of such institution; 


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1 (B) any bank holding company, any sav2 ings and loan holding company, and any sub3 sidiary of any of such companies; 

4 (C) any broker or dealer that is registered 

5 under section 15 of the Securities Exchange 

6 Act of 1934 (15 U.S.C. 78o) and is a member 

7 of the Securities Investor Protection Corpora8 tion, and any subsidiary of such broker or deal9 er; 

10 (D) any insurer that is supervised by a 

11 State insurance regulator, and any subsidiary 

12 of such insurer; 

13 (E) any nonbank financial company (as de14 fined in section 102(a)(4) of the Dodd-Frank 

15 Wall Street Reform and Consumer Protection 

16 Act (12 U.S.C. 5311(a)(4))) that is supervised 

17 by the Board of Governors of the Federal Re18 serve System under section 113 of the Dodd19 Frank Wall Street Reform and Consumer Pro20 tection Act (12 U.S.C. 5323), including any in21 termediate holding company supervised as a 

22 nonbank financial company, and any subsidiary 

23 of such a nonbank financial company; and 


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1 (F) any issuer that is sponsored by 1 or 

2 more eligible issuers for the sole purpose of 

3 issuing covered bonds on a pooled basis. 

4 (10) OVERSIGHT PROGRAM.—The term ‘‘over5 sight program’’ means the covered bond regulatory 

6 oversight program established under section 3(a). 

7 (11) SECRETARY.—The term ‘‘Secretary’’ 

8 means the Secretary of the Department of the 

9 Treasury. 

10 (12) SUBSTITUTE ASSET.—The term ‘‘sub11 stitute asset’’ means— 

12 (A) cash; 

13 (B) any direct obligation of the United 

14 States Government, and any security or other 

15 obligation whose full principal and interest are 

16 insured or guaranteed by the full faith and 

17 credit of the United States Government; 

18 (C) any direct obligation of a United 

19 States Government corporation or Government20 sponsored enterprise of the highest credit qual21 ity, and any other security or other obligation 

22 of the highest credit quality whose full principal 

23 and interest are insured or guaranteed by such 

24 corporation or enterprise, except that the out25 standing principal amount of these obligations 


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1 in any cover pool may not exceed an amount 

2 equal to 20 percent of the outstanding principal 

3 amount of all assets in the cover pool without 

4 the approval of the applicable covered bond reg5 ulator; 

6 (D) any other substitute asset designated 

7 by the Secretary, by rule and in consultation 

8 with the covered bond regulators; and 

9 (E) any deposit account or securities ac10 count into which only an asset described in sub11 paragraph (A), (B), (C), or (D) may be depos12 ited or credited. 

13 SEC. 3. REGULATORY OVERSIGHT OF COVERED BOND PRO14 GRAMS ESTABLISHED. 

15 (a) ESTABLISHMENT.— 

16 (1) IN GENERAL.—Not later than 180 days 

17 after the date of the enactment of this Act, the Sec18 retary shall, by rule and in consultation with the 

19 covered bond regulators, establish a covered bond 

20 regulatory oversight program that provides for— 

21 (A) covered bond programs to be evaluated 

22 according to reasonable and objective standards 

23 in order to be approved under paragraph (2), 

24 including any additional eligibility standards for 

25 eligible assets and any other criteria determined 


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1 appropriate by the Secretary to further the pur2 poses of this Act; 

3 (B) covered bond programs to be main4 tained in a manner that is consistent with this 

5 Act and safe and sound asset-liability manage6 ment and other financial practices; and 

7 (C) any estate created under section 4 to 

8 be administered in a manner that is consistent 

9 with maximizing the value and the proceeds of 

10 the related cover pool in a resolution under this 

11 Act. 

12 (2) APPROVAL OF EACH COVERED BOND PRO13 GRAM.— 

14 (A) IN GENERAL.—A covered bond shall be 

15 subject to this Act only if the covered bond is 

16 issued by an eligible issuer under a covered 

17 bond program that is approved by the applica18 ble covered bond regulator. 

19 (B) APPROVAL PROCESS.—Each covered 

20 bond regulator shall apply the standards estab21 lished by the Secretary under the oversight pro22 gram to evaluate a covered bond program that 

23 has been submitted by an eligible issuer for ap24 proval. Each covered bond regulator also shall 

25 take into account relevant supervisory factors, 


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1 including safety and soundness considerations, 

2 in evaluating a covered bond program that has 

3 been submitted for approval. Each covered bond 

4 regulator, promptly after approving a covered 

5 bond program, shall provide the Secretary with 

6 the name of the covered bond program, the 

7 name of the eligible issuer, and all other infor8 mation reasonably requested by the Secretary in 

9 order to update the registry under paragraph 

10 (3)(A). Each eligible issuer, promptly after 

11 issuing a covered bond under an approved cov12 ered bond program, shall provide the Secretary 

13 with all information reasonably requested by 

14 the Secretary in order to update the registry 

15 under paragraph (3)(B). 

16 (C) EXISTING COVERED BOND PRO17 GRAMS.—A covered bond regulator may approve 

18 a covered bond program that is in existence on 

19 the date of the enactment of this Act. Upon 

20 such approval, each covered bond under the 

21 covered bond program shall be subject to this 

22 Act, regardless of when the covered bond was 

23 issued. 


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1 (D) MULTIPLE COVERED BOND PROGRAMS

2 PERMITTED.—An eligible issuer may have more 

3 than 1 covered bond program. 

4 (E) CEASE AND DESIST AUTHORITY.—The 

5 applicable covered bond regulator may direct an 

6 eligible issuer to cease issuing covered bonds 

7 under an approved covered bond program if the 

8 covered bond program is not maintained in a 

9 manner that is consistent with this Act and the 

10 oversight program and if, after notice that is 

11 reasonable under the circumstances, the issuer 

12 does not remedy all deficiencies identified by 

13 the applicable covered bond regulator. 

14 (F) CAP ON THE AMOUNT OF OUT15 STANDING COVERED BONDS.— 

16 (i) IN GENERAL.—With respect to 

17 each eligible issuer that submits a covered 

18 bond program for approval, the applicable 

19 covered bond regulator shall set, consistent 

20 with safety and soundness considerations 

21 and the financial condition of the eligible 

22 issuer, the maximum amount, as a percent23 age of the eligible issuer’s total assets, of 

24 outstanding covered bonds that the eligible 

25 issuer may issue. 


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1 (ii) REVIEW OF CAP.—The applicable 

2 covered bond regulator may, not more fre3 quently than quarterly, review the percent4 age set under clause (i) and, if safety and 

5 soundness considerations or the financial 

6 condition of the eligible issuer has 

7 changed, increase or decrease such per8 centage. Any decrease made pursuant to 

9 this clause shall have no effect on existing 

10 covered bonds issued by the eligible issuer. 

11 (3) REGISTRY.—Under the oversight program, 

12 the Secretary shall maintain a registry that is pub13 lished on a Web site available to the public and that, 

14 for each covered bond program approved by a cov15 ered bond regulator, contains— 

16 (A) the name of the covered bond program, 

17 the name of the eligible issuer, and all other in18 formation that the Secretary considers nec19 essary to adequately identify the covered bond 

20 program and the eligible issuer; and 

21 (B) all information that the Secretary con22 siders necessary to adequately identify all out23 standing covered bonds issued under the cov24 ered bond program (including the reports deVerDate Mar 15 2010 03:43 Nov 10, 2011 Jkt 019200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\S1835.IS S1835

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1 scribed in paragraphs (3) and (4) of subsection 

2 (b)). 

3 (4) FEES.—Each covered bond regulator may 

4 levy, on the issuers of covered bonds under the pri5 mary supervision of such covered bond regulator, 

6 reasonably apportioned fees that such covered bond 

7 regulator considers necessary, in the aggregate, to 

8 defray the costs of such covered bond regulator car9 rying out the provisions of this Act. Such funds shall 

10 not be construed to be Government funds or appro11 priated monies and shall not be subject to apportion12 ment for purposes of chapter 15 of title 31, United 

13 States Code, or any other provision of law. 

14 (b) MINIMUM OVER-COLLATERALIZATION REQUIRE15 MENTS.— 

16 (1) REQUIREMENTS ESTABLISHED.—The Sec17 retary, by rule and in consultation with the covered 

18 bond regulators, shall establish minimum over19 collateralization requirements for covered bonds 

20 backed by each of the eligible asset classes. The min21 imum over-collateralization requirements shall be de22 signed to ensure that sufficient eligible assets and 

23 substitute assets are maintained in the cover pool to 

24 satisfy all principal and interest payments on the 

25 covered bonds when due through maturity and shall 


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1 be based on the credit, collection, and interest rate 

2 risks (excluding the liquidity risks) associated with 

3 the eligible asset class. 

4 (2) ASSET COVERAGE TEST.—The eligible as5 sets and the substitute assets in any cover pool shall 

6 be required, in the aggregate, to meet at all times 

7 the applicable minimum over-collateralization re8 quirements. 

9 (3) MONTHLY REPORTING.—On a monthly 

10 basis, each issuer of covered bonds shall submit a re11 port on whether the cover pool that secures the cov12 ered bonds meets the applicable minimum over13 collateralization requirements to— 

14 (A) the Secretary; 

15 (B) the applicable covered bond regulator; 

16 (C) the applicable indenture trustee; 

17 (D) the applicable covered bondholders; 

18 and 

19 (E) the applicable independent asset mon20 itor. 

21 (4) INDEPENDENT ASSET MONITOR.— 

22 (A) APPOINTMENT.—Each issuer of cov23 ered bonds shall appoint the indenture trustee 

24 for the covered bonds, or another unaffiliated 


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1 entity, as an independent asset monitor for the 

2 applicable cover pool. 

3 (B) DUTIES.—An independent asset mon4 itor appointed under subparagraph (A) shall, on 

5 an annual or other more frequent periodic basis 

6 determined by the Secretary under the over7 sight program— 

8 (i) verify whether the cover pool meets 

9 the applicable minimum over10 collateralization requirements; and 

11 (ii) report to the Secretary, the appli12 cable covered bond regulator, the applica13 ble indenture trustee, and the applicable 

14 covered bondholders on whether the cover 

15 pool meets the applicable minimum over16 collateralization requirements. 

17 (C) REMOVAL AND REPLACEMENT.—The 

18 independent asset monitor appointed under sub19 paragraph (A) may be removed and replaced— 

20 (i) by a covered bond regulator in any 

21 case in which such action is in the best in22 terest of the covered bond investors; and 

23 (ii) by covered bond holders who own 

24 a majority of the outstanding principal 


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1 amount of the covered bonds secured by 

2 the applicable cover pool, at any time. 

3 (5) NO LOSS OF STATUS.—Covered bonds shall 

4 remain subject to this Act regardless of whether the 

5 applicable cover pool ceases to meet the applicable 

6 minimum over-collateralization requirements. 

7 (6) FAILURE TO MEET REQUIREMENTS.— 

8 (A) IN GENERAL.—If a cover pool fails to 

9 meet the applicable minimum over10 collateralization requirements, and if the failure 

11 is not cured within the time specified in the re12 lated transaction documents, the failure shall be 

13 an uncured default for purposes of section 4(a). 

14 (B) NOTICE REQUIRED.—An issuer of cov15 ered bonds shall promptly give the Secretary 

16 and the applicable covered bond regulator writ17 ten notice if the cover pool securing the covered 

18 bonds fails to meet the applicable minimum 

19 over-collateralization requirements, if the failure 

20 is cured within the time specified in the related 

21 transaction documents, or if the failure is not 

22 so cured. 

23 (c) REQUIREMENTS FOR ELIGIBLE ASSETS.— 

24 (1) REQUIREMENTS.— 


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1 (A) LOANS.—A loan shall not qualify as an 

2 eligible asset for so long as the loan is delin3 quent for more than 60 consecutive days. 

4 (B) SECURITIES.—A security shall not 

5 qualify as an eligible asset for so long as the se6 curity does not meet any credit-quality require7 ment under this Act. 

8 (C) ORIGINATION.—An asset shall not 

9 qualify as an eligible asset if the asset was not 

10 originated in compliance with any rule or super11 visory guidance of a Federal agency applicable 

12 to the asset at the time of origination. 

13 (D) NO DOUBLE PLEDGE.—An asset shall 

14 not qualify as an eligible asset for so long as 

15 the asset is subject to a prior perfected security 

16 interest or other prior perfected lien that has 

17 been granted in an unrelated transaction. Noth18 ing in this Act shall affect such a prior per19 fected security interest or other prior perfected 

20 lien, and the rights of such lien holders. 

21 (2) FAILURE TO MEET REQUIREMENTS.—Sub22 ject to paragraph (1)(D), if an asset in a cover pool 

23 does not satisfy any applicable requirement de24 scribed in paragraph (1) or any other applicable 

25 standard or criterion described in this Act, the overVerDate Mar 15 2010 03:43 Nov 10, 2011 Jkt 019200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\S1835.IS S1835

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1 sight program, or the related transaction documents, 

2 the asset shall not qualify as an eligible asset for 

3 purposes of the asset coverage test described in sub4 section (b)(2). A disqualified asset shall remain in 

5 the cover pool unless and until removed by the issuer 

6 in compliance with the provisions of this Act, the 

7 oversight program, and the related transaction docu8 ments. No disqualified asset may be removed from 

9 the cover pool after an estate has been created for 

10 the related covered bond program under section 

11 4(b)(1) or 4(c)(2), except in connection with the 

12 management of the cover pool under section 

13 4(d)(1)(E). 

14 (d) OTHER REQUIREMENTS.— 

15 (1) BOOKS AND RECORDS OF ISSUER.—Each 

16 issuer of covered bonds shall clearly mark its books 

17 and records to identify the assets that comprise the 

18 cover pool securing the covered bonds. 

19 (2) SCHEDULE OF ELIGIBLE ASSETS AND SUB20 STITUTE ASSETS.—Each issuer of covered bonds 

21 shall deliver to the applicable indenture trustee and 

22 the applicable independent asset monitor, on at least 

23 a monthly basis, a schedule that identifies all eligible 

24 assets and substitute assets in the cover pool secur25 ing the covered bonds. 


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1 (3) SINGLE ELIGIBLE ASSET CLASS.—No cover 

2 pool described in section 2(3)(A) may include eligible 

3 assets from more than 1 eligible asset class. No 

4 cover pool described in section 2(3)(B) may include 

5 covered bonds backed by more than 1 eligible asset 

6 class. 

7 SEC. 4. RESOLUTION UPON DEFAULT OR INSOLVENCY. 

8 (a) UNCURED DEFAULT DEFINED.—For purposes of 

9 this section, the term ‘‘uncured default’’ means a default 

10 on a covered bond that has not been cured within the time, 

11 if any, specified in the related transaction documents. 

12 (b) DEFAULT ON COVERED BONDS PRIOR TO CON13 SERVATORSHIP, RECEIVERSHIP, LIQUIDATION, OR BANK14 RUPTCY.— 

15 (1) CREATION OF SEPARATE ESTATE.—If an 

16 uncured default occurs on a covered bond before the 

17 issuer of the covered bond enters conservatorship, 

18 receivership, liquidation, or bankruptcy, an estate 

19 shall be immediately and automatically created by 

20 operation of law and shall exist and be administered 

21 separate and apart from the issuer or any subse22 quent conservatorship, receivership, liquidating agen23 cy, or estate in bankruptcy for the issuer or any 

24 other assets of the issuer. A separate estate shall be 

25 created for each affected covered bond program. 


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1 (2) ASSETS AND LIABILITIES OF ESTATE.—Any 

2 estate created under paragraph (1) shall be com3 prised of the cover pool (including over4 collateralization in the cover pool) that secures the 

5 covered bond. The cover pool shall be immediately 

6 and automatically released to and held by the estate 

7 free and clear of any right, title, interest, or claim 

8 of the issuer or any conservator, receiver, liquidating 

9 agent, or trustee in bankruptcy for the issuer or any 

10 other assets of the issuer. The estate shall be fully 

11 liable on the covered bond and all other covered 

12 bonds and related obligations of the issuer (including 

13 obligations under related derivative transactions) 

14 that are secured by a perfected security interest in 

15 or other perfected lien on the cover pool when the 

16 estate is created. The estate shall not be liable on 

17 any obligation of the issuer that is not secured by 

18 a perfected security interest in or other perfected 

19 lien on the cover pool when the estate is created. No 

20 conservator, receiver, liquidating agent, or trustee in 

21 bankruptcy for the issuer may charge or assess the 

22 estate for any claim of the conservator, receiver, liq23 uidating agent, or trustee in bankruptcy or the con24 servatorship, receivership, liquidating agency, or es25 tate in bankruptcy and may not obtain or perfect a 


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1 security interest in or other lien on the cover pool 

2 to secure such a claim. 

3 (3) RETENTION OF CLAIMS.—Any holder of a 

4 covered bond or related obligation for which an es5 tate has become liable under paragraph (2) shall re6 tain a claim against the issuer for any deficiency 

7 with respect to the covered bond or related obliga8 tion. If the issuer enters conservatorship, receiver9 ship, liquidation, or bankruptcy, any contingent 

10 claim for such a deficiency shall be allowed as a 

11 provable claim in the conservatorship, receivership, 

12 liquidating agency, or bankruptcy case. The contin13 gent claim shall be estimated by the conservator, re14 ceiver, liquidating agent, or bankruptcy court for 

15 purposes of allowing the claim as a provable claim 

16 if awaiting the fixing of the contingent claim would 

17 unduly delay the resolution of the conservatorship, 

18 receivership, liquidating agency, or bankruptcy case. 

19 (4) RESIDUAL INTEREST.— 

20 (A) ISSUANCE OF RESIDUAL INTEREST.— 

21 Upon the creation of an estate under paragraph 

22 (1), a residual interest in the estate shall be im23 mediately and automatically issued by operation 

24 of law to the issuer. 


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1 (B) NATURE OF RESIDUAL INTEREST.— 

2 The residual interest under subparagraph (A) 

3 shall— 

4 (i) be an exempted security as de5 scribed in section 5; 

6 (ii) represent the right to any surplus 

7 from the cover pool after the covered bonds 

8 and all other liabilities of the estate have 

9 been fully and irrevocably paid; and 

10 (iii) be evidenced by a certificate exe11 cuted by the trustee of the estate. 

12 (5) OBLIGATIONS OF ISSUER.— 

13 (A) IN GENERAL.—After the creation of an 

14 estate under paragraph (1), the issuer shall— 

15 (i) transfer to or at the direction of 

16 the trustee for the estate all property of 

17 the estate that is in the possession or 

18 under the control of the issuer, including 

19 all tangible or electronic books, records, 

20 files, and other documents or materials re21 lating to the assets and liabilities of the es22 tate; and 

23 (ii) at the election of the trustee or a 

24 servicer or administrator for the estate, 

25 continue servicing the applicable cover pool 


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1 for 120 days after the creation of the es2 tate in return for a fair-market-value fee, 

3 as determined by the trustee in consulta4 tion with the applicable covered bond regu5 lator, that shall be payable from the estate 

6 as an administrative expense. 

7 (B) OBLIGATIONS ABSOLUTE.—Neither 

8 the issuer, whether acting as debtor in posses9 sion or in any other capacity, nor any conser10 vator, receiver, liquidating agent, or trustee in 

11 bankruptcy for the issuer or any other assets of 

12 the issuer may disaffirm, repudiate, or reject 

13 the obligation to turn over property or to con14 tinue servicing the cover pool as provided in 

15 subparagraph (A). 

16 (c) DEFAULT ON COVERED BONDS UPON CON17 SERVATORSHIP, RECEIVERSHIP, LIQUIDATION, OR BANK18 RUPTCY.— 

19 (1) CORPORATION CONSERVATORSHIP OR RE20 CEIVERSHIP.— 

21 (A) IN GENERAL.—If the Corporation is 

22 appointed as conservator or receiver for an 

23 issuer of covered bonds before an uncured de24 fault results in the creation of an estate under 

25 subsection (b), the Corporation as conservator 


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1 or receiver shall have an exclusive right, during 

2 the 1-year period beginning on the date of the 

3 appointment, to transfer any cover pool owned 

4 by the issuer in its entirety, together with all 

5 covered bonds and related obligations that are 

6 secured by a perfected security interest in or 

7 other perfected lien on the cover pool, to an8 other eligible issuer that meets all conditions 

9 and requirements specified in the related trans10 action documents. The Corporation as conser11 vator or receiver may not remove any asset 

12 from the cover pool, except to the extent other13 wise agreed by a transferee that has assumed 

14 the covered bond program pursuant to subpara15 graph (C). 

16 (B) OBLIGATIONS DURING 1-YEAR PE17 RIOD.—During the 1-year period described in 

18 subparagraph (A), the Corporation as conser19 vator or receiver shall fully and timely satisfy 

20 all monetary and nonmonetary obligations of 

21 the issuer under all covered bonds and the re22 lated transaction documents and shall fully and 

23 timely cure all defaults by the issuer (other 

24 than its conservatorship or receivership) under 


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1 the applicable covered bond program, in each 

2 case, until the earlier of— 

3 (i) the transfer of the applicable cov4 ered bond program to another eligible 

5 issuer as provided in subparagraph (A); or 

6 (ii) the delivery to the Secretary, the 

7 applicable covered bond regulator, the ap8 plicable indenture trustee, and the applica9 ble covered bondholders of a written notice 

10 from the Corporation as conservator or re11 ceiver electing to cease further perform12 ance under the applicable covered bond 

13 program. 

14 (C) ASSUMPTION BY TRANSFEREE.—If the 

15 Corporation as conservator or receiver transfers 

16 a covered bond program to another eligible 

17 issuer within the 1-year period as provided in 

18 subparagraph (A), the transferee shall take 

19 ownership of the applicable cover pool and shall 

20 become fully liable on all covered bonds and re21 lated obligations of the issuer that are secured 

22 by a perfected security interest in or other per23 fected lien on the cover pool. 

24 (2) OTHER CIRCUMSTANCES.—An estate shall 

25 be immediately and automatically created by operVerDate Mar 15 2010 03:43 Nov 10, 2011 Jkt 019200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\S1835.IS S1835

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1 ation of law and shall exist and be administered sep2 arate and apart from an issuer of covered bonds and 

3 any conservatorship, receivership, liquidating agency, 

4 or estate in bankruptcy for the issuer or any other 

5 assets of the issuer, if— 

6 (A) a conservator, receiver, liquidating 

7 agent, or trustee in bankruptcy, other than the 

8 Corporation, is appointed for the issuer before 

9 an uncured default results in the creation of an 

10 estate under subsection (b); or 

11 (B) in the case of the appointment of the 

12 Corporation as conservator or receiver as de13 scribed in paragraph (1)(A), the Corporation as 

14 conservator or receiver— 

15 (i) does not complete the transfer of 

16 the applicable covered bond program to an17 other eligible issuer within the 1-year pe18 riod as provided in paragraph (1)(A); 

19 (ii) delivers to the Secretary, the ap20 plicable covered bond regulator, the appli21 cable indenture trustee, and the applicable 

22 covered bondholders a written notice elect23 ing to cease further performance under the 

24 applicable covered bond program; or 


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•S 1835 IS

1 (iii) fails to fully and timely satisfy all 

2 monetary and nonmonetary obligations of 

3 the issuer under the covered bonds and the 

4 related transaction documents or to fully 

5 and timely cure all defaults by the issuer 

6 (other than its conservatorship or receiver7 ship) under the applicable covered bond 

8 program. 

9 A separate estate shall be created for each affected 

10 covered bond program. 

11 (3) ASSETS AND LIABILITIES OF ESTATE.—Any 

12 estate created under paragraph (2) shall be com13 prised of the cover pool (including over14 collateralization in the cover pool) that secures the 

15 covered bonds. The cover pool shall be immediately 

16 and automatically released to and held by the estate 

17 free and clear of any right, title, interest, or claim 

18 of the issuer or any conservator, receiver, liquidating 

19 agent, or trustee in bankruptcy for the issuer or any 

20 other assets of the issuer. The estate shall be fully 

21 liable on the covered bonds and all other covered 

22 bonds and related obligations of the issuer (including 

23 obligations under related derivative transactions) 

24 that are secured by a perfected security interest in 

25 or other perfected lien on the cover pool when the 


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•S 1835 IS

1 estate is created. The estate shall not be liable on 

2 any obligation of the issuer that is not secured by 

3 a perfected security interest in or other perfected 

4 lien on the cover pool when the estate is created. No 

5 conservator, receiver, liquidating agent, or trustee in 

6 bankruptcy for the issuer may charge or assess the 

7 estate for any claim of the conservator, receiver, liq8 uidating agent, or trustee in bankruptcy or the con9 servatorship, receivership, liquidating agency, or es10 tate in bankruptcy and may not obtain or perfect a 

11 security interest in or other lien on the cover pool 

12 to secure such a claim. 

13 (4) CONTINGENT CLAIM.—Any contingent claim 

14 against an issuer for a deficiency with respect to a 

15 covered bond or related obligation for which an es16 tate has become liable under paragraph (3) shall be 

17 allowed as a provable claim in the conservatorship, 

18 receivership, liquidating agency, or bankruptcy case 

19 for the issuer. The contingent claim shall be esti20 mated by the conservator, receiver, liquidating 

21 agent, or bankruptcy court for purposes of allowing 

22 the claim as a provable claim if awaiting the fixing 

23 of the contingent claim would unduly delay the reso24 lution of the conservatorship, receivership, liqui25 dating agency, or bankruptcy case. 


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1 (5) RESIDUAL INTEREST.— 

2 (A) ISSUANCE OF RESIDUAL INTEREST.— 

3 Upon the creation of an estate under paragraph 

4 (2), and regardless of whether any contingent 

5 claim described in paragraph (4) becomes fixed 

6 or is estimated, a residual interest in the estate 

7 shall be immediately and automatically issued 

8 by operation of law to the conservator, receiver, 

9 liquidating agent, or trustee in bankruptcy for 

10 the issuer. 

11 (B) NATURE OF RESIDUAL INTEREST.— 

12 The residual interest under subparagraph (A) 

13 shall— 

14 (i) be an exempted security as de15 scribed in section 5; 

16 (ii) represent the right to any surplus 

17 from the cover pool after the covered bonds 

18 and all other liabilities of the estate have 

19 been fully and irrevocably paid; and 

20 (iii) be evidenced by a certificate exe21 cuted by the trustee of the estate. 

22 (6) OBLIGATIONS OF ISSUER.— 

23 (A) IN GENERAL.—After the creation of an 

24 estate under paragraph (2), the issuer and its 


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1 conservator, receiver, liquidating agent, or 

2 trustee in bankruptcy shall— 

3 (i) transfer to or at the direction of 

4 the trustee for the estate all property of 

5 the estate that is in the possession or 

6 under the control of the issuer or its con7 servator, receiver, liquidating agent, or 

8 trustee in bankruptcy, including all tan9 gible or electronic books, records, files, and 

10 other documents or materials relating to 

11 the assets and liabilities of the estate; and 

12 (ii) at the election of the trustee or a 

13 servicer or administrator for the estate, 

14 continue servicing the applicable cover pool 

15 for 120 days after the creation of the es16 tate in return for a fair-market-value fee, 

17 as determined by the trustee in consulta18 tion with the applicable covered bond regu19 lator, that shall be payable from the estate 

20 as an administrative expense. 

21 (B) OBLIGATIONS ABSOLUTE.—Neither 

22 the issuer, whether acting as debtor in posses23 sion or in any other capacity, nor any conser24 vator, receiver, liquidating agent, or trustee in 

25 bankruptcy for the issuer or any other assets of 


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1 the issuer may disaffirm, repudiate, or reject 

2 the obligation to turn over property or to con3 tinue servicing the cover pool as provided in 

4 subparagraph (A). 

5 (d) ADMINISTRATION AND RESOLUTION OF ES6 TATES.— 

7 (1) TRUSTEE, SERVICER, AND ADMINIS8 TRATOR.— 

9 (A) IN GENERAL.—Upon the creation of 

10 any estate under subsection (b)(1) or (c)(2), the 

11 applicable covered bond regulator shall— 

12 (i) appoint the trustee for the estate; 

13 (ii) appoint 1 or more servicers or ad14 ministrators for the cover pool held by the 

15 estate; and 

16 (iii) give the Secretary, the applicable 

17 indenture trustee, the applicable covered 

18 bondholders, and the owner of the residual 

19 interest written notice of the creation of 

20 the estate. 

21 (B) TERMS AND CONDITIONS OF APPOINT22 MENT.—All terms and conditions of any ap23 pointment under paragraph (1), including the 

24 terms and conditions relating to compensation, 

25 shall conform to the requirements of this Act 


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•S 1835 IS

1 and the oversight program and otherwise shall 

2 be determined by the applicable covered bond 

3 regulator. 

4 (C) QUALIFICATION.—The applicable cov5 ered bond regulator may require the trustee or 

6 any servicer or administrator for an estate to 

7 post in favor of the United States, for the ben8 efit of the estate, a bond that is conditioned on 

9 the faithful performance of the duties of the 

10 trustee or the servicer or administrator. The 

11 covered bond regulator shall determine the 

12 amount of any bond required under this sub13 paragraph and the sufficiency of the surety on 

14 the bond. A proceeding on a bond required 

15 under this subparagraph may not be com16 menced after two years after the date on which 

17 the trustee or the servicer or administrator was 

18 discharged. 

19 (D) POWERS AND DUTIES OF TRUSTEE.— 

20 The trustee for an estate is the representative 

21 of the estate and, subject to the provisions of 

22 this Act, has capacity to sue and be sued. The 

23 trustee shall— 


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•S 1835 IS

1 (i) administer the estate in compliance 

2 with this Act, the oversight program, and 

3 the related transaction documents; 

4 (ii) be accountable for all property of 

5 the estate that is received by the trustee; 

6 (iii) make a final report and file a 

7 final account of the administration of the 

8 estate with the applicable covered bond 

9 regulator; and 

10 (iv) after the estate has been fully ad11 ministered, close the estate. 

12 (E) POWERS AND DUTIES OF SERVICER OR

13 ADMINISTRATOR.—Any servicer or adminis14 trator for an estate— 

15 (i) shall— 

16 (I) collect, realize on (by liquida17 tion or other means), and otherwise 

18 manage the cover pool held by the es19 tate in compliance with this Act, the 

20 oversight program, and the related 

21 transaction documents and in a man22 ner consistent with maximizing the 

23 value and the proceeds of the cover 

24 pool; 


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1 (II) deposit or invest all proceeds 

2 and funds received in compliance with 

3 this Act, the oversight program, and 

4 the related transaction documents and 

5 in a manner consistent with maxi6 mizing the net return to the estate, 

7 taking into account the safety of the 

8 deposit or investment; and 

9 (III) apply, or direct the trustee 

10 for the estate to apply, all proceeds 

11 and funds received and the net return 

12 on any deposit or investment to make 

13 distributions in compliance with para14 graphs (3) and (4); 

15 (ii) may borrow funds or otherwise ob16 tain credit, for the benefit of the estate, in 

17 compliance with paragraph (2) on a se18 cured or unsecured basis and on a priority, 

19 pari passu, or subordinated basis; 

20 (iii) shall, at the times and in the 

21 manner required by the applicable covered 

22 bond regulator, submit to the covered bond 

23 regulator, the Secretary, the applicable in24 denture trustee, the applicable covered 

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1 terest, and any other person designated by 

2 the covered bond regulator, reports that 

3 describe the activities of the servicer or ad4 ministrator on behalf of the estate, the 

5 performance of the cover pool held by the 

6 estate, and distributions made by the es7 tate; and 

8 (iv) shall assist the trustee in pre9 paring the final report and the final ac10 count of the administration of the estate. 

11 (F) SUPERVISION OF TRUSTEE, SERVICER, 

12 AND ADMINISTRATOR.—The applicable covered 

13 bond regulator shall supervise the trustee and 

14 any servicer or administrator for an estate. The 

15 covered bond regulator shall require that all re16 ports submitted under subparagraph (E)(iii) do 

17 not contain any untrue statement of a material 

18 fact and do not omit to state a material fact 

19 necessary in order to make the statements 

20 made, in light of the circumstances under which 

21 they are made, not misleading. 

22 (G) REMOVAL AND REPLACEMENT OF

23 TRUSTEE, SERVICER, AND ADMINISTRATOR.—If 

24 the covered bond regulator determines that it is 

25 in the best interests of an estate, the covered 


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•S 1835 IS

1 bond regulator may remove or replace the trust2 ee or any servicer or administrator for the es3 tate. The removal of the trustee or any servicer 

4 or administrator does not abate any pending ac5 tion or proceeding involving the estate, and any 

6 successor or other trustee, servicer, or adminis7 trator shall be substituted as a party in the ac8 tion or proceeding. 

9 (H) PROFESSIONALS.—The trustee or any 

10 servicer or administrator for an estate may em11 ploy 1 or more attorneys, accountants, apprais12 ers, auctioneers, or other professional persons 

13 to represent or assist the trustee or the servicer 

14 or administrator in carrying out its duties. The 

15 employment of any professional person and all 

16 terms and conditions of employment, including 

17 the terms and conditions relating to compensa18 tion, shall conform to the requirements of this 

19 Act and the oversight program and otherwise 

20 shall be subject to the approval of the applica21 ble covered bond regulator. 

22 (I) APPROVED FEES AND EXPENSES.—Un23 less otherwise provided in the applicable terms 

24 and conditions of appointment or employment, 

25 all approved fees and expenses of the trustee, 


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•S 1835 IS

1 any servicer or administrator, or any profes2 sional person employed by the trustee or any 

3 servicer or administrator shall be payable from 

4 the estate as administrative expenses. 

5 (J) ACTIONS BY OR ON BEHALF OF ES6 TATE.—The trustee or any servicer or adminis7 trator for an estate may commence or continue 

8 judicial, administrative, or other actions, in the 

9 name of the estate or in its own name on behalf 

10 of the estate, for the purpose of collecting, real11 izing on, or otherwise managing the cover pool 

12 held by the estate or exercising its other powers 

13 or duties on behalf of the estate. 

14 (K) ACTIONS AGAINST ESTATE.—No court 

15 may issue an attachment or execution on any 

16 property of an estate. Except at the request of 

17 the applicable covered bond regulator or as oth18 erwise provided in this subparagraph or sub19 paragraph (J), no court may take any action to 

20 restrain or affect the resolution of an estate 

21 under this Act. No person (including the appli22 cable indenture trustee and any applicable cov23 ered bondholder) may commence or continue 

24 any judicial, administrative, or other action 

25 against the estate, the trustee, or any servicer 


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•S 1835 IS

1 or administrator or take any other act to affect 

2 the estate, the trustee, or any servicer or ad3 ministrator that is not expressly permitted by 

4 this Act, the oversight program, and the related 

5 transaction documents, except for a judicial or 

6 administrative action to compel the release of 

7 funds that— 

8 (i) are available to the estate; 

9 (ii) are permitted to be distributed 

10 under this Act and the oversight program; 

11 and 

12 (iii) are permitted and required to be 

13 distributed under the related transaction 

14 documents and any contracts executed by 

15 or on behalf of the estate. 

16 (L) SOVEREIGN IMMUNITY.—Except in 

17 connection with a guarantee provided under 

18 paragraph (4) or any other contract executed 

19 by the applicable covered bond regulator under 

20 this section 4, the Secretary and the covered 

21 bond regulator shall be entitled to sovereign im22 munity in carrying out the provisions of this 

23 Act. 

24 (2) BORROWINGS AND CREDIT.— 


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•S 1835 IS

1 (A) IN GENERAL.—Any servicer or admin2 istrator for an estate created under subsection 

3 (b)(1) or (c)(2) may borrow funds or otherwise 

4 obtain credit, on behalf of and for the benefit 

5 of the estate, from any person in compliance 

6 with this paragraph (2) solely for the purpose 

7 of providing liquidity in the case of timing 

8 mismatches among the assets and the liabilities 

9 of the estate. Except with respect to an under10 writer, section 5 of the Securities Act of 1933, 

11 the Trust Indenture Act of 1939, and any State 

12 or local law requiring registration for an offer 

13 or sale of a security or registration or licensing 

14 of an issuer of, underwriter of, or broker or 

15 dealer in a security does not apply to the offer 

16 or sale under this paragraph (2) of a security 

17 that is not an equity security. 

18 (B) CONDITIONS.—A servicer or adminis19 trator may borrow funds or otherwise obtain 

20 credit under subparagraph (A)— 

21 (i) on terms affording the lender only 

22 claims or liens that are fully subordinated 

23 to the claims and interests of the applica24 ble indenture trustee and the applicable 

25 covered bondholders and all other claims 


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•S 1835 IS

1 against and interests in the estate, except 

2 for the residual interest, if the servicer or 

3 administrator certifies to the applicable 

4 covered bond regulator that, in the busi5 ness judgment of the servicer or adminis6 trator, the borrowing or credit is in the 

7 best interests of the estate and is expected 

8 to maximize the value and the proceeds of 

9 the cover pool held by the estate; or 

10 (ii) on terms affording the lender 

11 claims or liens that have priority over or 

12 are pari passu with the claims or interests 

13 of the applicable indenture trustee or the 

14 applicable covered bondholders or other 

15 claims against or interests in the estate, 

16 if— 

17 (I) the servicer or administrator 

18 certifies to the applicable covered 

19 bond regulator that, in the business 

20 judgment of the servicer or adminis21 trator, the borrowing or credit is in 

22 the best interests of the estate and is 

23 expected to maximize the value and 

24 the proceeds of the cover pool held by 

25 the estate; and 


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•S 1835 IS

1 (II) the applicable covered bond 

2 regulator authorizes the borrowing or 

3 credit. 

4 (C) LIMITED LIABILITY.—A servicer or ad5 ministrator shall not be liable for any error in 

6 business judgment when borrowing funds or 

7 otherwise obtaining credit under this paragraph 

8 (2) unless the servicer or administrator acted in 

9 bad faith or in willful disregard of its duties. 

10 (D) STUDY ON BORROWINGS AND CRED11 IT.—The Comptroller General of the United 

12 States shall conduct a study on whether the 

13 Federal reserve banks should be authorized to 

14 lend funds or otherwise extend credit to an es15 tate under this paragraph (2) and, if so, what 

16 conditions and limits should be established to 

17 mitigate any risk that the United States Gov18 ernment could absorb credit losses on the cover 

19 pool held by the estate. The Comptroller Gen20 eral shall submit a report to the Committee on 

21 Banking, Housing, and Urban Affairs of the 

22 Senate and the Committee on Financial Serv23 ices of the House of Representatives on the re24 sults of the study not later than 6 months after 

25 the date of enactment of this Act. 


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1 (3) DISTRIBUTIONS BY ESTATE.—All payments 

2 or other distributions by an estate shall be made at 

3 the times, in the amounts, and in the manner set 

4 forth in the covered bonds, the related transaction 

5 documents, and any contracts executed by or on be6 half of the estate in compliance with this Act and 

7 the oversight program. To the extent that the rel8 ative priority of the liabilities of the estate are not 

9 specified in or otherwise ascertainable from their 

10 terms, distributions shall be made on each distribu11 tion date under the covered bonds, the related trans12 action documents, or any contracts executed by or 

13 on behalf of the estate— 

14 (A) first, to pay accrued and unpaid super15 priority claims under paragraph (2)(B)(ii); 

16 (B) second, to pay accrued and unpaid ad17 ministrative expense claims under paragraph 

18 (1)(I), paragraph (2)(B)(ii), section 4(b)(5)(A), 

19 or section 4(c)(6)(A); 

20 (C) third, to pay— 

21 (i) accrued and unpaid claims under 

22 the covered bonds and the related trans23 action documents according to their terms; 

24 and 


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•S 1835 IS

1 (ii) accrued and unpaid pari passu 

2 claims under paragraph (2)(B)(ii); and 

3 (D) fourth, to pay accrued and unpaid 

4 subordinated claims under paragraph (2)(B)(i). 

5 (4) DISTRIBUTIONS ON RESIDUAL INTEREST.— 

6 After all other claims against and interests in an es7 tate have been fully and irrevocably paid or 

8 defeased, the trustee shall or shall cause a servicer 

9 or administrator to distribute the remainder of the 

10 estate to or at the direction of the owner of the re11 sidual interest. No interim distribution on the resid12 ual interest may be made before that time, unless 

13 the applicable covered bond regulator— 

14 (A) approves the distribution after deter15 mining that all other claims against and inter16 ests in the estate will be fully, timely, and irrev17 ocably paid according to their terms; and 

18 (B) provides an indemnity, for the benefit 

19 of the estate, assuring that all other claims 

20 against and interests in the estate will be fully, 

21 timely, and irrevocably paid according to their 

22 terms. 

23 (5) CLOSING OF ESTATE.—After an estate has 

24 been fully administered, the trustee shall close the 

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1 cable covered bond regulator, shall destroy all 

2 records of the estate. 

3 (6) NO LOSS TO TAXPAYERS.—Taxpayers shall 

4 bear no losses from the resolution of an estate under 

5 this Act. To the extent that the Secretary and the 

6 Corporation jointly determine that the Deposit In7 surance Fund incurred actual losses that are higher 

8 because the covered bond program of an insured de9 pository institution was subject to resolution under 

10 this Act rather than as part of the receivership of 

11 the institution under the Federal Deposit Insurance 

12 Act (12 U.S.C. 1811 et seq.), the Corporation may 

13 exercise the powers available under section 7(b) of 

14 the Federal Deposit Insurance Act (12 U.S.C. 

15 1817(b)) to recover an amount equal to those losses 

16 after consulting with the Secretary. 

17 SEC. 5. SECURITIES LAW PROVISIONS. 

18 (a) SECURITIES LAWS TREATMENT OF COVERED

19 BONDS.— 

20 (1) TREATMENT OF CERTAIN BANKS AND

21 OTHER ENTITIES.— 

22 (A) SECURITIES LAWS COVERAGE.—A cov23 ered bond described in subparagraph (C) is and 

24 shall be treated as a security issued or guaran25 teed by a bank under section 3(a)(2) of the SeVerDate Mar 15 2010 03:43 Nov 10, 2011 Jkt 019200 PO 00000 Frm 00046 Fmt 6652 Sfmt 6201 E:\BILLS\S1835.IS S1835

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1 curities Act of 1933 (15 U.S.C. 77c(a)(2)), sec2 tion 3(c)(3) of the Investment Company Act of 

3 1940 (15 U.S.C. 80a–3(c)(3)), and section 

4 304(a)(4)(A) of the Trust Indenture Act of 

5 1939 (15 U.S.C. 77ddd(a)(4)(A)), as applica6 ble. 

7 (B) SECURITIES EXCHANGE ACT OF 1934

8 EXEMPTION.—No covered bond described in 

9 subparagraph (C) shall be treated as an asset10 backed security, as that term is defined in sec11 tion 3 of the Securities Exchange Act of 1934 

12 (15 U.S.C. 78c), or a structured finance prod13 uct, as that term is defined in section 939F of 

14 the Dodd-Frank Wall Street Reform and Con15 sumer Protection Act (15 U.S.C. 78o–9). 

16 (C) APPLICABILITY.—A covered bond de17 scribed in this subparagraph is a covered bond 

18 that is— 

19 (i) issued or guaranteed by a bank; or 

20 (ii) issued by an eligible issuer de21 scribed in section 2(9)(F) and sponsored 

22 solely by 1 or more banks for the sole pur23 pose of issuing covered bonds. 

24 (D) REGULATIONS.—Each covered bond 

25 regulator for 1 or more banks shall adopt, as 


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•S 1835 IS

1 part of the securities regulations of the covered 

2 bond regulator, a separate scheme of registra3 tion, disclosure, and reporting obligations and 

4 exemptions for offers or sales of covered bonds 

5 described in subparagraph (C), which regula6 tions shall— 

7 (i) provide for uniform and consistent 

8 standards for such covered bond issuers, 

9 with respect to any such covered bonds, to 

10 the extent possible; and 

11 (ii) be consistent with existing regula12 tions governing offers or sales of non13 convertible debt. 

14 (2) TREATMENT OF CERTAIN ASSOCIATIONS

15 AND COOPERATIVE BANKS.— 

16 (A) SECURITIES LAWS COVERAGE.—A cov17 ered bond described in subparagraph (C) is and 

18 shall be treated as a security issued by an enti19 ty under section 3(a)(5)(A) of the Securities 

20 Act of 1933 (15 U.S.C. 77c(a)(5)(A)), section 

21 3(c)(3) of the Investment Company Act of 1940 

22 (15 U.S.C. 80a–3(c)(3)), and section 

23 304(a)(4)(A) of the Trust Indenture Act of 

24 1939 (15 U.S.C. 77ddd(a)(4)(A)), as applica25 ble. 


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•S 1835 IS

1 (B) SECURITIES EXCHANGE ACT OF 1934

2 EXEMPTION.—No covered bond described in 

3 subparagraph (C) shall be treated as an asset4 backed security, as that term is defined in sec5 tion 3 of the Securities Exchange Act of 1934 

6 (15 U.S.C. 78c), or a structured finance prod7 uct, as that term is defined in section 939F of 

8 the Dodd-Frank Wall Street Reform and Con9 sumer Protection Act (15 U.S.C. 78o–9). 

10 (C) APPLICABILITY.—A covered bond de11 scribed in this subparagraph is a covered bond 

12 that is— 

13 (i) issued by an entity described in 

14 section 3(a)(5)(A) of the Securities Act of 

15 1933 (15 U.S.C. 77c(a)(5)(A)); or 

16 (ii) issued by an eligible issuer de17 scribed in section 2(9)(F) and sponsored 

18 solely by 1 or more such entities for the 

19 sole purpose of issuing covered bonds. 

20 (D) REGULATIONS.—Each covered bond 

21 regulator for 1 or more entities described in 

22 section 3(a)(5)(A) of the Securities Act of 1933 

23 (15 U.S.C. 77c(a)(5)(A)) shall adopt, as part of 

24 the securities regulations of the covered bond 

25 regulator, a separate scheme of registration, 


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•S 1835 IS

1 disclosure, and reporting obligations and ex2 emptions for offers or sales of covered bonds 

3 described in subparagraph (C), which regula4 tions shall— 

5 (i) provide for uniform and consistent 

6 standards for such covered bond issuers, 

7 with respect to any such covered bonds, to 

8 the extent possible; and 

9 (ii) shall be consistent with regula10 tions governing offers or sales of non11 convertible debt. 

12 (3) CONSTRUCTION.—No provision of this Act, 

13 including paragraph (1) or (2), may be construed or 

14 applied in a manner that impairs or limits any other 

15 exemption that is available under applicable securi16 ties laws. 

17 (b) EXEMPTIONS FOR ESTATES.—Any estate that is 

18 or may be created under section 4(b)(1) or 4(c)(2) shall 

19 be exempt from all State and Federal securities laws, ex20 cept that such estate— 

21 (1) shall be subject to all anti-fraud provisions 

22 of such securities laws; 

23 (2) shall be subject to the reporting require24 ments established by the applicable covered bond 

25 regulator under section 4(d)(1)(E)(iii); and 


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•S 1835 IS

1 (3) shall succeed to any requirement of the 

2 issuer to file such periodic information, documents, 

3 and reports in respect of the covered bonds, as speci4 fied in section 13(a) of the Securities Exchange Act 

5 of 1934 (15 U.S.C. 78m(a)) or rules established by 

6 an appropriate Federal banking agency. 

7 (c) EXEMPTIONS FOR RESIDUAL INTERESTS.—Any 

8 residual interest in an estate that is or may be created 

9 under section 4(b)(1) or 4(c)(2) shall be exempt from all 

10 State and Federal securities laws. 

11 SEC. 6. MISCELLANEOUS PROVISIONS. 

12 (a) DOMESTIC SECURITIES.—Section 106(a)(1) of 

13 the Secondary Mortgage Market Enhancement Act of 

14 1984 (15 U.S.C. 77r–1(a)(1)) is amended— 

15 (1) in subparagraph (C), by striking ‘‘or’’ at 

16 the end; 

17 (2) in subparagraph (D), by adding ‘‘or’’ at the 

18 end; and 

19 (3) by inserting after subparagraph (D) the fol20 lowing: 

21 ‘‘(E) covered bonds (as defined in section 

22 2 of the United States Covered Bond Act of 

23 2011),’’. 

24 (b) NO CONFLICT.—The provisions of this Act shall 

25 apply, notwithstanding any provision of the Federal DeVerDate Mar 15 2010 03:43 Nov 10, 2011 Jkt 019200 PO 00000 Frm 00051 Fmt 6652 Sfmt 6201 E:\BILLS\S1835.IS S1835

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1 posit Insurance Act (12 U.S.C. 1811 et seq.), title 11, 

2 United States Code, title II of the Dodd-Frank Wall 

3 Street Reform and Consumer Protection Act (12 U.S.C. 

4 5381 et seq.), or any other provision of Federal law with 

5 respect to conservatorship, receivership, liquidation, or 

6 bankruptcy. No provision of the Federal Deposit Insur7 ance Act (12 U.S.C. 1811 et seq.), title 11, United States 

8 Code, title II of the Dodd-Frank Wall Street Reform and 

9 Consumer Protection Act (12 U.S.C. 5381 et seq.), or any 

10 other provision of Federal law with respect to conservator11 ship, receivership, liquidation, or bankruptcy may be con12 strued or applied in a manner that defeats or interferes 

13 with the purpose or operation of this Act. 

14 (c) ANNUAL REPORT TO CONGRESS.—The covered 

15 bond regulators shall, annually— 

16 (1) submit a joint report to the Congress de17 scribing the current state of the covered bond mar18 ket in the United States; and 

19 (2) testify on the current state of the covered 

20 bond market in the United States before the Com21 mittee on Financial Services of the House of Rep22 resentatives and the Committee on Banking, Hous23 ing, and Urban Affairs of the Senate. 

Æ 


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