(A) any insured depository institution (as 
defined in section 3 of the Federal Deposit In-
surance Act) and any subsidiary of any such in-
stitution; 
(B) any bank holding company (as defined 
in section 2 of the Bank Holding Company Act 
of 1956) or any savings and loan holding com-
pany (as defined in section 10 of the Home 
Owners’ Loan Act); and 
(C) any issuing entity that is sponsored by 
1 or more eligible issuers for the sole purpose 
of issuing covered bonds on a pooled basis. 
(10) OVERSIGHT PROGRAM.—The term ‘‘over-
sight program’’ means the covered bonds regulatory 
oversight program established under section 3(a). 
(11) SUBSTITUTE
ASSET.—The term ‘‘sub-
stitute asset’’ means— 
(A) cash; 
(B) any direct obligation of the United 
States Government, and any security or other 
obligation whose full principal and interest are 
insured or guaranteed by the full faith and 
credit of the United States Government; 
(C) any direct obligation of a United 
States Government corporation or Government- 
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sponsored enterprise of the highest investment 
grade, and any other security or other obliga-
tion of the highest investment grade whose full 
principal and interest are insured or guaranteed 
by any such corporation or enterprise (including 
any mortgage-backed security issued, insured, 
or guaranteed by any such corporation or enter-
prise); 
(D) any overnight investment in Federal 
funds; and 
(E) any deposit account or securities ac-
count into which only substitute assets may be 
deposited or credited. 
SEC. 3. REGULATORY OVERSIGHT OF COVERED BOND PRO-
GRAMS ESTABLISHED. 
(a) ESTABLISHMENT.— 
(1) IN GENERAL.—The covered bond regulator 
shall issue regulations establishing a covered bond 
regulatory oversight program that meets the require-
ments of this section and that provides for covered 
bond programs to be maintained in a manner con-
sistent with safe and sound banking practices. 
(2) APPROVAL OF EACH COVERED BOND PRO-
GRAM.— 
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(A) APPROVAL BY COVERED BOND REGU-
LATOR.—A covered bond shall be subject to this 
Act only if such covered bond is issued by an 
eligible issuer under a covered bond program 
that is approved by the covered bond regulator. 
An eligible issuer may have 1 or more covered 
bond programs. The covered bond regulator 
may approve a covered bond program that is al-
ready in existence, and upon such approval, all 
covered bonds under such covered bond pro-
gram shall be subject to this Act regardless of 
when the covered bonds are issued. 
(B) CONSULTATION WITH ANY FEDERAL 
PRIMARY
REGULATOR.—Before approving any 
covered bond program of any eligible issuer, the 
covered bond regulator shall consult with the 
primary Federal regulator, if any, of such 
issuer. 
(3) REGISTRY.—Under the oversight program, 
the covered bond regulator shall maintain a registry 
on a Web site available to the public containing the 
name of each approved covered bond program and 
information on all outstanding covered bonds issued 
under each approved covered bond program. 
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(4) FEES.—The covered bond regulator shall 
levy fees on issuers of covered bonds in an amount, 
in the aggregate, equal to the costs of the covered 
bond regulator in carrying out the provisions of this 
Act. 
(b) MINIMUM OVER-COLLATERALIZATION REQUIRE-
MENTS.— 
(1) ESTABLISHMENT REQUIRED.—The covered 
bond regulator from time to time shall establish 
minimum over-collateralization requirements for cov-
ered bonds backed by each of the eligible asset class-
es based on the credit, collection, and interest-rate 
risks, but not the liquidity risks, associated with 
such eligible asset class. 
(2) RELIANCE ON FEDERAL RESERVE SYSTEM 
STANDARDS.—In establishing requirements under 
paragraph (1), the covered bond regulator may rely 
on over-collateralization levels required for the same 
or similar asset classes by the Board of Governors 
of the Federal Reserve System when extending cred-
it to depository institutions under the Federal Re-
serve Act. 
(3) TESTING.—Each cover pool securing cov-
ered bonds shall be required at all times to satisfy 
an asset-coverage test. The asset-coverage test shall 
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measure (as such term is defined by the covered 
bond regulator) whether the eligible assets and the 
substitute assets in a cover pool satisfy the min-
imum over-collateralization requirements established 
by the covered bond regulator for covered bonds 
backed by the applicable eligible asset class. Each 
issuer of covered bonds shall be required to perform 
the asset-coverage test monthly on each of its cover 
pools and to disclose the results to the primary Fed-
eral regulator of such issuer, if any, the covered 
bond regulator, and the applicable covered bond-
holders. Each issuer of covered bonds also shall be 
required to appoint the indenture trustee for such 
covered bonds or another unaffiliated entity as an 
independent asset monitor for the applicable cover 
pool, and such asset monitor shall be required, on an 
annual or more frequent basis, to verify whether 
such cover pool satisfies the asset-coverage test and 
to disclose the results to the primary Federal regu-
lator of such issuer, if any, the covered bond regu-
lator, and the applicable covered bondholders. 
(4) NO LOSS OF STATUS.—Covered bonds shall 
remain subject to this Act regardless of whether the 
applicable cover pool ceases to satisfy the asset-cov-
erage test at any time after issuance. If a cover pool 
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securing covered bonds fails to satisfy the asset-cov-
erage test and if such failure is not cured within the 
time specified in the related transaction documents, 
such failure shall constitute a default that results in 
the creation of an estate under section 4. 
(c) ELIGIBILITY REQUIREMENTS.— 
(1) SINGLE ELIGIBLE ASSET CLASS.—No cover 
pool may include eligible assets from more than one 
eligible asset class. 
(2) INELIGIBLE
ASSETS.—A loan shall not 
qualify as an eligible asset while such loan is delin-
quent for more than 60 consecutive days. A security 
shall not qualify as an eligible asset while such secu-
rity does not meet any investment-grade requirement 
under this Act. 
(d) OTHER REQUIREMENTS.— 
(1) BOOKS AND RECORDS OF ISSUER.—Each 
issuer of covered bonds shall clearly mark its books 
and records to identify the assets that comprise the 
applicable cover pool. 
(2) SCHEDULE OF ELIGIBLE ASSETS AND SUB-
STITUTE
ASSETS.—Each issuer of covered bonds 
shall deliver to the applicable indenture trustee, on 
at least a monthly basis, a schedule of all eligible as-
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sets and substitute assets in the applicable cover 
pool. 
SEC. 4. DEFAULT AND INSOLVENCY. 
(a) DEFAULT ON COVERED BONDS PRIOR TO CON-
SERVATORSHIP, RECEIVERSHIP, LIQUIDATION, OR BANK-
RUPTCY.— 
(1) CREATION OF SEPARATE ESTATE.—If an 
uncured default occurs with respect to a covered 
bond before the issuer of such covered bond enters 
conservatorship, receivership, liquidation, or bank-
ruptcy, an estate shall be automatically created by 
operation of law and shall exist separate and apart 
from such issuer or any subsequent conservatorship, 
receivership, liquidating agency, or estate in bank-
ruptcy for such issuer or any of its other assets. 
(2) ASSETS AND LIABILITIES OF ESTATE.—Any 
estate created under paragraph (1) shall be com-
prised of the applicable cover pool, which shall be 
automatically released to and held by such estate 
free and clear of any right, title, interest, or claim 
of the issuer or any conservator, receiver, liquidating 
agent, or trustee in bankruptcy for the issuer or any 
of its other assets, and such estate shall be fully lia-
ble on all covered bonds and related obligations of 
the issuer (including obligations under related deriv-
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ative transactions) that are secured by such cover 
pool. 
(3) RETENTION OF CLAIMS.—Any holder of a 
covered bond or related obligation secured by a cover 
pool for which an estate has been created under 
paragraph (1) shall retain a claim against the issuer 
for any deficiency with respect to such covered bond 
or related obligation. 
(4) RESIDUAL INTEREST.—Upon the creation 
of an estate under paragraph (1), a residual interest 
in such estate shall be automatically issued by oper-
ation of law to the issuer. The residual interest 
shall— 
(A) be an exempted security as described 
in section 5; 
(B) represent the right to any surplus 
from the cover pool after the applicable covered 
bonds and all other liabilities of such estate 
have been paid in full; and 
(C) be evidenced by a certificate executed 
by the covered bond regulator as trustee of such 
estate. 
(5) OBLIGATION
OF
ISSUER.—After the cre-
ation of an estate under paragraph (1), the issuer 
shall be obligated to cooperate in effecting a transfer 
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to the covered bond regulator or its designee of all 
tangible or electronic books, records, files, and other 
documents or materials relating to the assets and li-
abilities of such estate and, at the election of the 
covered bond regulator, shall continue servicing the 
cover pool for 120 days after the creation of such es-
tate in return for a fair-market-value fee. 
(6) 
TRUSTEE, 
SERVICER, 
AND
ADMINIS-
TRATOR.— 
(A) IN GENERAL.—The covered bond regu-
lator shall— 
(i) act as the trustee of any estate 
created under paragraph (1); and 
(ii) appoint 1 or more servicers or ad-
ministrators for the cover pool held by 
such estate. 
(B) POWERS AND DUTIES OF SERVICER OR 
ADMINISTRATOR.—Any servicer or adminis-
trator appointed for an estate— 
(i) shall collect, realize on (by liquida-
tion or other means), and otherwise man-
age the cover pool held by such estate; 
(ii) may borrow or otherwise procure 
funds for the benefit of such estate on a 
secured or unsecured basis; 
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(iii) shall invest and use the proceeds 
and funds received to make all remaining 
interest and principal payments on the ap-
plicable covered bonds according to their 
terms (or, if an acceleration or similar 
event occurs under the related transaction 
documents, at the times specified in such 
transaction documents) and to satisfy any 
other liabilities of such estate; and 
(iv) shall, in the event of a liquidity 
constraint caused by a timing mismatch 
among the assets and the liabilities of an 
estate, pursue private market alternatives 
to provide the needed liquidity. 
(C) SUPERVISION OF SERVICER OR ADMIN-
ISTRATOR.—The covered bond regulator shall 
supervise any servicer or administrator that is 
appointed for an estate and, if in the best inter-
ests of the estate, may remove or replace any 
servicer or administrator. Each servicer or ad-
ministrator for an estate, as and when required 
by the covered bond regulator, shall deliver re-
ports that describe its activities on behalf of 
such estate and the performance of the cover 
pool held by such estate. All fees and expenses 
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of any servicer or administrator for an estate 
shall be approved by the covered bond regulator 
and shall be paid from such estate. 
(b) DEFAULT
ON COVERED BONDS UPON CON-
SERVATORSHIP, RECEIVERSHIP, LIQUIDATION, OR BANK-
RUPTCY.— 
(1) FDIC CONSERVATORSHIP
OR
RECEIVER-
SHIP.— 
(A) IN GENERAL.—If the Corporation is 
appointed as conservator or receiver for an 
issuer of covered bonds before an uncured de-
fault results in the creation of an estate under 
subsection (a), the Corporation as conservator 
or receiver shall have an exclusive right, for 15 
days from the date of such appointment, to 
transfer any cover pool owned by such issuer in 
its entirety together with all covered bonds and 
related obligations secured by such cover pool to 
another eligible issuer that meets all conditions 
and requirements specified in the related trans-
action documents. 
(B) OBLIGATIONS
DURING
15-DAY
PE-
RIOD.—During the 15-day period described in 
subparagraph (A), the Corporation as conser-
vator or receiver shall satisfy all monetary and 
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nonmonetary obligations of the issuer under the 
covered bonds and the related transaction docu-
ments until any transfer to another eligible 
issuer is completed. 
(C) ASSUMPTION BY TRANSFEREE.—If the 
Corporation as conservator or receiver effects a 
transfer described in subparagraph (A) within 
the 15-day period, the transferee shall take 
ownership of the applicable cover pool and shall 
become fully liable on all covered bonds and re-
lated obligations of the issuer that are secured 
by such cover pool. 
(2) OTHER CIRCUMSTANCES.—If— 
(A) a conservator, receiver, liquidating 
agent, or trustee in bankruptcy, other than the 
Corporation, is appointed for an issuer of cov-
ered bonds before an uncured default results in 
the creation of an estate under subsection (a); 
or 
(B) in the case an issuer of covered bonds 
for which the Corporation is appointed as con-
servator or receiver as described in paragraph 
(1)(A), no transfer by the Corporation as con-
servator or receiver is completed within the 15- 
day period as described in such paragraph, an 
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estate shall be automatically created by oper-
ation of law and shall exist separate and apart 
from such issuer and the conservatorship, re-
ceivership, liquidating agency, or estate in 
bankruptcy for such issuer or any of its other 
assets. 
(3) ASSETS AND LIABILITIES OF ESTATE.—Any 
estate created under paragraph (2) shall be com-
prised of the applicable cover pool, which shall be 
automatically released to and held by such estate 
free and clear of any right, title, interest, or claim 
of the issuer or any conservator, receiver, liquidating 
agent, or trustee in bankruptcy for the issuer or any 
of its other assets, and such estate shall be fully lia-
ble on all covered bonds and related obligations of 
the issuer (including obligations under related deriv-
ative transactions) that are secured by such cover 
pool. 
(4) CONTINGENT CLAIM.—Any contingent claim 
for a deficiency with respect to a covered bond or re-
lated obligation for which an estate has been created 
under paragraph (2) shall be estimated by the con-
servator, receiver, liquidating agent, or bankruptcy 
court for purposes of allowing such claim as a prov-
able claim if awaiting the fixing of that contingent 
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claim would unduly delay the resolution of the con-
servatorship, receivership, liquidating agency, or 
bankruptcy case. 
(5) RESIDUAL INTEREST.—Upon the creation 
of an estate under paragraph (2), and regardless of 
whether any contingent claim described in paragraph 
(4) becomes fixed or is estimated, a residual interest 
in such estate shall be automatically issued by oper-
ation of law to the conservator, receiver, liquidating 
agent, or trustee in bankruptcy for the issuer. The 
residual interest shall— 
(A) be an exempted security as described 
in section 5; 
(B) represent the right to any surplus 
from the cover pool after the applicable covered 
bonds and all other liabilities of such estate 
have been paid in full; and 
(C) be evidenced by a certificate executed 
by the covered bond regulator as trustee of such 
estate. 
(6) OBLIGATION
OF
ISSUER.—After the cre-
ation of an estate under paragraph (2), the issuer 
and its conservator, receiver, liquidating agent, or 
trustee in bankruptcy shall transfer to the covered 
bond regulator or its designee all tangible or elec-
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tronic books, records, files, and other documents or 
materials relating to the assets and liabilities of such 
estate and, at the election of the covered bond regu-
lator (but subject to any right of repudiation or re-
jection held by such conservator, receiver, liquidating 
agent, or trustee in bankruptcy), shall continue serv-
icing the cover pool for 120 days after the creation 
of such estate in return for a fair-market-value fee. 
(7) 
TRUSTEE, 
SERVICER, 
AND
ADMINIS-
TRATOR.— 
(A) IN GENERAL.—The covered bond regu-
lator shall— 
(i) act as the trustee of any estate 
created under paragraph (2); and 
(ii) appoint 1 or more servicers or ad-
ministrators for the cover pool held by 
such estate. 
(B) POWERS AND DUTIES OF SERVICER OR 
ADMINISTRATOR.—Any servicer or adminis-
trator appointed for an estate— 
(i) shall collect, realize on (by liquida-
tion or other means), and otherwise man-
age the cover pool held by such estate; 
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(ii) may borrow or otherwise procure 
funds for the benefit of such estate on a 
secured or unsecured basis; 
(iii) shall invest and use the proceeds 
and funds received to make all remaining 
interest and principal payments on the ap-
plicable covered bonds according to their 
terms (or, if an acceleration or similar 
event occurs under the related transaction 
documents, at the times specified in such 
transaction documents) and to satisfy any 
other liabilities of such estate; and 
(iv) shall, in the event of a liquidity 
constraint caused by a timing mismatch 
among the assets and the liabilities of an 
estate, pursue private market alternatives 
to provide the needed liquidity. 
(C) SUPERVISION OF SERVICER OR ADMIN-
ISTRATOR.—The covered bond regulator shall 
supervise any servicer or administrator that is 
appointed for an estate and, if in the best inter-
ests of the estate, may remove or replace any 
servicer or administrator. Each servicer or ad-
ministrator for an estate, as and when required 
by the covered bond regulator, shall deliver re-
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ports that describe its activities on behalf of 
such estate and the performance of the cover 
pool held by such estate. All fees and expenses 
of any servicer or administrator for an estate 
shall be approved by the covered bond regulator 
and shall be paid from such estate. 
SEC. 5. SECURITIES LAW PROVISIONS. 
(a) REGISTRATION.— 
(1) APPLICABILITY
TO
BANK
ISSUERS.—Cov-
ered bonds that are offered and sold to the public 
by a bank (or a subsidiary of a bank) shall be— 
(A) subject to— 
(i) securities regulations issued by the 
primary Federal regulator of such bank; 
and 
(ii) applicable antifraud rules; and 
(B) exempt from all other Federal securi-
ties laws. 
(2) APPLICABILITY TO ISSUERS SPONSORED BY 
1 OR MORE BANKS WITH SAME REGULATOR.—Cov-
ered bonds that are offered and sold to the public 
by an issuing entity that is sponsored only by 1 or 
more banks with the same primary Federal regu-
lator shall be— 
(A) subject to— 
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(i) securities regulations issued by 
such primary Federal regulator; and 
(ii) applicable antifraud rules; and 
(B) exempt from all other Federal securi-
ties laws. 
(3) OTHER ISSUERS.—For covered bonds that 
are offered and sold to the public by any other eligi-
ble issuer and that are not otherwise exempted secu-
rities, the Securities and Exchange Commission shall 
develop a streamlined registration scheme. 
(4) EXTENSION OF EXEMPTIONS TO SEPARATE 
ESTATES.—Each exemption described in paragraph 
(1) or (2) shall continue to apply to any estate cre-
ated under subsection (a) or (b) of section 4 and to 
any residual interest in such estate. 
(b) DISCLOSURE AND REPORTING.— 
(1) APPLICABILITY TO BANK ISSUERS.—At a 
reasonable time before the initial sale of a covered 
bond by a bank or a subsidiary of a bank, such bank 
or subsidiary shall make available to investors the 
information required by the securities regulations 
issued by such bank’s primary Federal regulator and 
applicable antifraud rules. 
(2) APPLICABILITY TO ISSUERS SPONSORED BY 
1 OR MORE BANKS WITH SAME REGULATOR.—At a 
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reasonable time before the initial sale of a covered 
bond by an issuing entity that is sponsored only by 
1 or more banks with the same primary Federal reg-
ulator, such issuing entity shall make available to in-
vestors the information required by the securities 
regulations issued by such primary Federal regulator 
and applicable antifraud rules. 
(3) OTHER ISSUERS.—At a reasonable time be-
fore the initial sale of a covered bond that is not an 
exempted security by any other eligible issuer, such 
issuer shall make available to investors the informa-
tion required under the streamlined approach estab-
lished by the Securities and Exchange Commission 
under paragraph (a)(3) and applicable antifraud 
rules. 
(4) STANDARDS.—For each of the issuers de-
scribed in paragraphs (1) to (3), the content and 
frequency of reports to investors shall be determined 
according to the same standards that govern the ini-
tial information delivery requirement. 
SEC. 6. MISCELLANEOUS PROVISIONS. 
(a) DOMESTIC SECURITIES.—Section 106(a)(1) of 
the Secondary Mortgage Market Enhancement Act of 
1984 (15 U.S.C. 77r–1(a)(1)) is amended— 
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(1) in subparagraph (C), by striking ‘‘or’’ at 
the end; 
(2) in subparagraph (D), by adding ‘‘or’’ at the 
end; and 
(3) by inserting after subparagraph (D) the fol-
lowing: 
‘‘(E) covered bonds (as defined under sec-
tion 2(3) of the United States Covered Bond 
Act of 2010),’’. 
(b) REAL ESTATE MORTGAGE INVESTMENT CON-
DUITS.—Section 860G(a)(3) of the Internal Revenue Code 
of 1986 is amended— 
(1) in subparagraph (B), by striking ‘‘and’’ at 
the end; 
(2) in subparagraph (C), by striking the period 
and inserting a comma; and 
(3) by inserting after subparagraph (C) the fol-
lowing: 
‘‘(D) covered bonds secured by eligible as-
sets from the residential mortgage asset class, 
the home equity asset class, or the commercial 
mortgage asset class (within the meaning of 
section 2 of the United States Covered Bond 
Act of 2010).’’. 
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(c) TAX PROVISIONS.—Any estate created under sub-
section (a) or (b) of section 4 shall not be taxable as a 
separate entity. No transfer of any asset or liability to an 
estate under such subsections shall be a taxable event. The 
acquisition of any covered bond shall be treated as an ac-
quisition of a security, and not as an interest in a loan 
or a lending transaction, for purposes of determining the 
character of any related trade or business activity of the 
acquirer or any asset held by such acquirer. 
Æ 
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