Document ID: chunk:federal_register_of_legislation:F2022L01566:body:0:p6
Version: federal_register_of_legislation:F2022L01566
Segment Type: other
Provision Reference: 
Character Range: 13641–16594

not more than is reasonable for the efficient operation of the ADI's covered bond program.

Liabilities between the ADI and covered bond special purpose vehicle

    33.         Liabilities of the covered bond special purpose vehicle to the issuing ADI and of the issuing ADI to the covered bond special purpose vehicle (and the associated assets) will be disregarded for the purposes of applying Prudential Standards (other than this Prudential Standard).

Reports

    34.         Where APRA requests a report from a cover pool monitor pursuant to paragraph 30(4)(d) of the Banking Act, this will be at the expense of the issuing ADI.

Default provisions

    35.         An issuing ADI must ensure that documentation associated with a covered bond issue does not permit covered bond holders to make a claim on the covered bond special purpose vehicle or the cover pool unless the issuing ADI or the covered bond SPV has defaulted on their obligations to covered bond holders.

Implications for other obligations

    36.         Prior to issuing a covered bond, the issuing ADI must identify all existing obligations (whether financial or otherwise) subject to a negative pledge or similar commitment. The ADI will need to assess the impact of any such negative pledge or similar arrangement, including whether the issuing of the covered bonds could expose the ADI to requirements to accelerate payments or offer (or increase) collateral or security against the existing obligations.

    37.         For each obligation identified under paragraph 36 as potentially exposing the ADI to requirements to accelerate payments or offer (or increase) collateral or security, an ADI must, prior to issuing covered bonds:

       (a)        identify the circumstances in which it could be required to accelerate payments or offer collateral or security against the obligation, and the quantum of collateral that might be involved;

       (b)        assess the implications for its capital, liquidity and borrowing capacity if it were required to provide collateral against the obligation; and

       (c)        where relevant, assess whether the provision of collateral against the existing obligation would breach any requirement of the Banking Act or a Prudential Standard.

    38.         If an issuing ADI identifies an obligation pursuant to paragraph 36, it must consult with APRA prior to issuing covered bonds. APRA may, at its discretion, require the ADI to obtain, at the ADI's expense, an opinion, from an appropriate independent expert agreed by APRA, on any of the matters referred to in paragraph 37.

Notifications

    39.         An issuing ADI must provide to APRA, as soon as practicable after the issue of a covered bond, a written declaration signed by a responsible person of the ADI certifying that at the time of issue of the covered bond, the combined value of assets in cover pools securing covered bonds issued by