Order on Reporting Coverage Requirements, Over-coverage Requirements and Liquidity Buffers 1)

Pursuant to Section 33 f, No. 3, and Section 39, Paragraph 3, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, cf. Statutory Order No. 315 of 11 March 2022, Section 152 h, Nos. 1-3, and Section 373, Paragraph 4, of the Act on Financial Business, cf. Statutory Order No. 406 of 29 March 2022, and Section 5, Paragraph 3, No. 7, and Section 14, Paragraph 2, of the Act on a Ship Financing Institute, cf. Statutory Order No. 646 of 18 May 2022, the following is prescribed:

Scope

Section 1. This Order applies to:

1) credit institutions that have permission to issue covered bonds, cf. Section 16 a, Paragraph 1, of the Act on Financial Business,

2) mortgage credit institutions that have permission to issue mortgage bonds, covered bonds, and special covered mortgage bonds, cf. Section 8, Paragraph 1, and Section 16 a, Paragraph 1, of the Act on Financial Business, and

3) a ship financing institute that has permission to issue covered bonds, cf. Section 2 c, Paragraph 1, and ship mortgage bonds, cf. Section 2 a, of the Act on a Ship Financing Institute.

Content

Section 2. Issuers of mortgage bonds, special covered mortgage bonds, covered bonds, and ship mortgage bonds shall report coverage requirements, over-coverage requirements, and liquidity buffers.

Paragraph 2. The institute shall report by using the reporting schedule in Appendix 1.

Paragraph 3. The information shall be reported for each series with a series reserve fund or groups of series with a common series reserve fund, register, or capital center. For mortgage credit institutions and a ship financing institute, the institute is otherwise regarded as a separate series with a series reserve fund or a separate capital center, respectively.

Paragraph 4. The institute shall calculate the requirements as of the end of each quarter for the purpose of the reporting.

Paragraph 5. The reporting shall be submitted no later than 20 working days after the expiry of the 1st, 2nd, and 3rd quarters, respectively. Reporting of the calculation for the 4th quarter shall be submitted no later than 30 working days after the end of the year.

Coverage Requirements and Over-coverage Requirements

Section 3. The institute shall calculate the total principal amount of the bonds based on the nominal principle when calculating the coverage requirement and corresponding loans, cf. Section 3 of the Order on Valuation of Collateral and Loans in Real Estate and Section 6 of the Order on Valuation of Collateral and Loans in Ships, which are pledged as security for the issuance of covered bonds and ship mortgage bonds.

Paragraph 2. Where the institute uses derivatives for its risk hedging, and these entail an obligation for the series with a series reserve fund or the groups of series with a common series reserve fund, the register, or the capital center, the value shall be added to the value of the bonds. Derivatives shall be measured using the same valuation method as the underlying assets and bonds whose risks they hedge.

Paragraph 3. Mortgage credit institutions may use the exemptions in Section 18 a, Paragraph 3, Section 33 a, Paragraph 5, and Section 33 b, Paragraph 5, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, if the conditions for this are met.

Section 4. The institute shall calculate a coverage requirement based on payment obligations for bonds and payment claims on covering assets. Payment claims and payment obligations shall be calculated at fair value, cf. Section 33, Paragraph 3, of the Order on Valuation of Collateral and Loans in Real Estate and Section 11, Paragraph 6, of the Order on Valuation of Collateral and Loans in Ships.

Paragraph 2. Payment obligations for bonds shall be divided into payment obligations in relation to the issued bonds, payment obligations in accordance with financial instruments used to hedge risks between the covering assets and issued bonds, and expected costs associated with maintenance and management in connection with the winding up of the series with a series reserve fund or groups of series with a common series reserve fund, register, or capital center.

Paragraph 3. The assets used to meet the coverage requirement shall be divided in the report into payment claims on loans, payment claims from financial instruments used to hedge risks between the covering assets and issued bonds, and payment claims from other assets that serve as security for the bonds.

Paragraph 4. Payment claims on loans, cf. Paragraph 3, include both principal repayments and interest. Interest margin and contribution rate may be included in the valuation of the payment claim on loans; otherwise, it shall be reported separately.

Section 5. The institute shall calculate an over-coverage requirement for issuances of covered bonds and special covered mortgage bonds.

Paragraph 2. The institute's own issued bonds, which are placed in the series with a series reserve fund or groups of series with a common series reserve fund, register, or capital center, from which they are issued, may be offset in the calculation of the requirement.

Liquidity Buffer

Section 6. The institute shall calculate the liquidity buffer.

Paragraph 2. Mortgage credit institutions may use the exemptions in Section 21, Paragraphs 3 and 4, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, if the conditions for this are met. Credit institutions may use the exemption in Section 152g, Paragraph 13, of the Act on Financial Business.

Transitional Provisions

Section 7. The institute shall report for series or groups of series with a series reserve fund, capital centers, or registers from which issuance takes place after 8 July 2022.

Paragraph 2. Where issuances take place in an existing series with a series reserve fund or groups of series with a common series reserve fund, registers, or capital centers after 8 July 2022, the institute shall calculate the requirements based on the entire series with a series reserve fund or the group of series with a common series reserve fund, register, or capital center.

Penal Provisions

Section 8. Violation of Section 2, Section 3, Paragraph 1, Section 4, Paragraph 1, Section 5, Paragraph 1, and Section 6, Paragraph 1 is punishable by a fine.

Paragraph 2. Companies and other legal persons may be subject to criminal liability according to the rules in Chapter 5 of the Criminal Code.

Entry into Force

Section 9. This Order enters into force on 8 July 2022.

The Danish Financial Supervisory Authority, 31 May 2022

Jesper Berg
/ Kamilla Karen Hjølund

1) The Order contains provisions that implement parts of Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on the issuance of covered bonds and public supervision of covered bonds and amending Directives 2009/65/EC and 2014/59/EU, OJ L 328, page 29, 2019.

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Appendix 1
Reporting Schedule

1. Coverage Requirement – Mortgage Bonds/Ship Mortgage Bonds

Coverage Requirement – Principal Requirement (after derivative hedging)

1.1 Issued bonds (total).
1.1.1 Issued principal on bonds calculated in accordance with Section 18 a, Paragraph 2, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters or Section 2 a, Paragraph 3, of the Act on a Ship Financing Institute (nominal principle) and Section 18 a, Paragraph 4, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters or Section 2 a, Paragraph 4, of the Act on a Ship Financing Institute.
1.1.2 Issued principal and interest expenses on bonds calculated in accordance with Section 18 a, Paragraph 3, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters (exemption rule).

1.2 Principal on covering assets (total).
1.2.1 Principal on covering assets, cf. Section 18 a, Paragraph 2, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters or Section 2 a, Paragraph 3, of the Act on a Ship Financing Institute (nominal principle) and Section 18 a, Paragraph 4, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters or Section 2 a, Paragraph 4, of the Act on a Ship Financing Institute.
1.2.2 Principal and interest income on covering assets, cf. Section 18 a, Paragraph 3, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters (exemption rule).

1.3 Coverage percentage ((1.2 divided by 1.1) multiplied by 100). (minimum 100)

Coverage Requirement – Payment Claims

1.4 All payment obligations relating to mortgage bonds or ship mortgage bonds, cf. Section 18 a, Paragraph 1, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters or Section 2 a, Paragraph 2, of the Act on a Ship Financing Institute.
1.4.1 Hereof payment obligations in relation to the issued bonds.
1.4.2 Hereof payment obligations in accordance with financial instruments used to hedge risks between the covering assets and issued bonds.
1.4.3 Hereof expected costs associated with maintenance and management in connection with the winding up of the series with a series reserve fund or groups of series with a common series reserve fund, register, or capital center.

1.5 All payment claims relating to covering assets, cf. Section 18 a, Paragraph 1, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters or Section 2 a, Paragraph 2, of the Act on a Ship Financing Institute.
1.5.1 Hereof payment claims on loans.
1.5.2 Interest margin/contribution rate on loans.
1.5.3 Hereof payment claims from financial instruments used to hedge risks between the covering assets and issued bonds.
1.5.4 Hereof payment claims from other assets that serve as security for the bonds.

1.6 Coverage (1.5 minus 1.4).

2. Coverage Requirement and Over-coverage Requirement – Covered Bonds/Special Covered Mortgage Bonds

Coverage Requirement/Over-coverage Requirement – Principal Requirement (after derivative hedging)

2.1 Issued bonds (total).
2.1.1 Issued principal on bonds calculated in accordance with Section 33 a, Paragraph 4, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 33 b, Paragraph 4, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 152 a, Paragraph 2, of the Act on Financial Business, or Section 2 d, Paragraph 3, of the Act on a Ship Financing Institute (nominal principle) and Section 33 a, Paragraph 6, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 33 b, Paragraph 6, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 152 a, Paragraph 3, of the Act on Financial Business, or Section 2 d, Paragraph 4, of the Act on a Ship Financing Institute.
2.1.2 Issued principal and interest on bonds calculated in accordance with Section 33 a, Paragraph 5, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters or Section 33 b, Paragraph 5, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters (exemption rule).

2.2 Principal on covering assets (total).
2.2.1 Principal on covering assets, cf. Section 33 a, Paragraph 4, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 33 b, Paragraph 4, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 152 a, Paragraph 2, of the Act on Financial Business, or Section 2 d, Paragraph 3, of the Act on a Ship Financing Institute (nominal principle) and Section 33 a, Paragraph 6, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 33 b, Paragraph 6, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 152 a, Paragraph 3, of the Act on Financial Business, or Section 2 d, Paragraph 4, of the Act on a Ship Financing Institute.
2.2.2 Principal and interest on covering assets, cf. Section 33 a, Paragraph 5, or Section 33 b, Paragraph 5, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters (exemption rule).

2.3 Coverage percentage ((2.2 divided by 2.1) multiplied by 100). (minimum 102)

Coverage Requirement – Payment Claims

2.4 All payment obligations relating to covered bonds and special covered mortgage bonds, cf. Section 33 a, Paragraph 3, Section 33 b, Paragraph 3, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 152 a, Paragraph 1, of the Act on Financial Business, or Section 2 d, Paragraph 2, of the Act on a Ship Financing Institute.
2.4.1 Hereof payment obligations in relation to the issued bonds.
2.4.2 Hereof payment obligations in accordance with financial instruments used to hedge risks between the covering assets and issued bonds.
2.4.3 Hereof expected costs associated with maintenance and management in connection with the winding up of the series with a series reserve fund or groups of series with a common series reserve fund, register, or capital center.

2.5 All payment claims relating to covering assets, cf. Section 33 a, Paragraph 3, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 33 b, Paragraph 3, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 152 a, Paragraph 1, of the Act on Financial Business, or Section 2 d, Paragraph 2, of the Act on a Ship Financing Institute.
2.5.1 Hereof payment claims on loans.
2.5.2 Interest margin/Contribution rate on loans.
2.5.3 Hereof payment claims from financial instruments used to hedge risks between the covering assets and issued bonds.
2.5.4 Hereof payment claims from other assets that serve as security for the bonds.

2.6 Coverage (2.5 minus 2.4).

3. Liquidity Buffer – Mortgage Bonds/Ship Mortgage Bonds/Covered Bonds/Special Covered Mortgage Bonds

3.1 Outgoing net cash flows, cf. Section 21, Paragraph 1, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 152 g, Paragraph 11, of the Act on Financial Business, or Section 2 e, Paragraph 2, of the Act on a Ship Financing Institute.
3.2 Liquid assets, cf. Section 21, Paragraph 2, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, Section 152 g, Paragraph 12, of the Act on Financial Business, or Section 2 e, Paragraph 3, of the Act on a Ship Financing Institute.
3.3 Coverage (3.2 minus 3.1)

Filling out the Reporting Schedule

The schedules shall contain all information relevant to the respective issuance. Fields that are not relevant shall be filled in with N/A.

By "Outgoing net cash flows," cf. reporting schedule item 3.1, is meant all outgoing cash flows that fall due on a day, including principal and interest payments as well as payments in accordance with derivative contracts covered by the covered bond program, minus all incoming cash flows that fall due on the same day for claims related to the covering assets. The "outgoing net cash flows" are accumulated over 180 days.

The reporting shall be in the same currency. If there are multiple currencies, they shall be converted before summing.