SEC Division of Corporation Finance no-action letter: Royal Bank of Canada

MORRISON I FOERSTER
2000 PENNSYLVANIA AYE., NW
WASHINGTON, D.C.
MORRISON & FOERSTER LLP
NEW YORK, SAN FRANCISCO,
20006-1888 LOS ANGELES, PALO ALTO,
SAN DIEGO, WASHINGTON, D.C.
TELEPHONE: 202.887.1500 NORTHERN VIRGINIA, DENVER, SACRAMENTO, WALNUT CREEK FACSIMILE: 202.887.0763 TOKYO, LONDON, BRUSSELS, WWW.MOFO.COM BEIJING, SHANGHAI, HONG KONG Writer's Direct Contact 202.887.1563 DLynn@mofo.com Securities Act Form F-3 May 18,2012 Amy Starr Chief, Office of Capital Market Trends Division of Corporation Finance United States Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: Royal Bank of Canada Dear Ms. Starr:
On behalf of our client, Royal Bank of Canada (the "Issuer" or the "Bank"), we are writing to request the advice ofthe staff ofthe Division of Corporation Finance (the "Division") ofthe Securities and Exchange Commission (the "Commission") with regard to the Bank's plans to offer and sell covered bonds in the United States pursuant to a registration statement filed with the Commission.
I. Request
On behalf of the Bank, we request confirmation that the staff of the Division will not recommend that the Commission take enforcement action under the Securities Act of 1933 (the "Securities Act") if the Bank offers and sells covered bonds (the "Covered Bonds") and the related Guarantee on a registered basis under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a shelf registration statement on Form F-3 (the "Registration Statement"), as described in this letter.

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II. Background
The Bank proposes to file the Registration Statement with the Commission for the offer and sale of the Covered Bonds under the Bank's Global Covered Bond Programme (the "Programme"). Under the Programme, the Bank has offered and sold Covered Bonds outside of the United States in Europe and in Canada, under Regulation S of the Securities Act, and in the United States only in reliance on Rule 144A ofthe Securities Act. The Bank believes that covered bonds would provide an attractive investment alternative in the United States, and therefore believes that conducting a covered bond offering on a registered basis would greatly facilitate the introduction of the product in the United States. A. Description of the Bank The Bank is Canada's largest bank, as measured by assets and market capitalization, and is among the twenty largest banks in the world, based on market capitalization. The Bank's common shares are listed for trading on the Toronto Stock Exchange and the New York Stock Exchange. The Bank is a "foreign private issuer" as such term is defined in Rule 3b-4 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 405 under the Securities Act, with its Common Shares registered pursuant to Exchange Act
Section 12(b). The Bank files periodic reports and furnishes current reports with the
Commission, and, as discussed below, is currently eligible to register primary offerings of the Bank's securities on Form F-3.! B. Covered Bonds Generally The term "covered bonds" is generally used to refer to debt instruments that have recourse either to the issuing entity or to an affiliated group to which the issuing entity . belongs, or both, and, upon an issuer default also have recourse to a pool of collateral, called the cover pool, which is separate from the issuer's other assets. The cover pool usually consists of high quality assets, such as mortgages, mortgage-backed securities, or public debt. Covered bonds are issued by depositary institutions that are subject to supervision by banking authorities. The covered bond market has grown rapidly in recent years. Covered bond investors typically include central banks, pension funds, insurance companies, asset managers and bank treasuries. Investors in covered bonds are usually seeking low risk, yield-bearing products with long maturities. 1 The Bank has on file with the Commission an effective shelf registration statement on Form F-3 (Registration No. 333-163632).

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While the United Kingdom and certain jurisdictions in Europe have adopted legislation with respect to covered bonds, such legislation has not yet been adopted in Canada.2
C. Structure of the Bank's Covered Bonds
The Covered Bonds are the direct, unsecured, and unconditional obligations ofthe Bank issued pursuant to a trust deed entered into on October 25,2007, and most recently amended and restated on April 6, 2011 (the "Trust Deed") between the Bank, as issuer, RBC Covered Bond Guarantor Limited Partnership (the "Guarantor LP"), as guarantor, and Computershare Trust Company of Canada, as bond trustee (the "Bond Trustee"). Every Covered Bond issued under the Programme is unconditionally and irrevocably guaranteed as to payments of interest and principal (the "Guarantee") by the Guarantor LP pursuant to the terms of the Trust Deed: The obligations of the Guarantor LP under the Guarantee are secured by a security interest in all ofthe assets (the "Cover Pool") ofthe Guarantor LP granted in favor of the Bond Trustee, for and on behalf of the Covered Bond holders and certain other specified creditors of the Guarantor LP. 3 The Guarantor LP is a limited partnership formed under the Limited Partnership Act (Ontario) pursuant to the terms of a limited partnership agreement entered into on October 25,2007 and most recently amended and restated on March 16,2010 (the "Guarantor LP Agreement") between RBC Covered Bond GP Inc., as managing general partner (the "Managing GP"), 6848320 Canada Inc., as liquidation general partner (the "Liquidation GP"), and the Bank, as limited partner. As described more fully below, the Bank is the sole limited partner ofthe Guarantor LP and holds substantially all ofthe interests in the Guarantor LP.4 The Managing GP is a wholly owned subsidiary of the Bank and holds a de minimis interest in the Guarantor LP. The remaining de minimis portion of the Guarantor LP is owned by the Liquidation GP, a special purpose entity that is partly owned by the Bank and otherwise held by the RBC Covered Bond LGP Trust (the "LGP Trust") which has as its trustee Computershare Trust Company of Canada. Subject to the exceptions described below, any distributions from the 2 On April 26, 2012 the Canadian Government introduced legislation to establish a registry for institutions that issue covered bonds and for covered bond programs and to provide for the protection of covered bond contracts and covered bond collateral in the event of an issuer's bankruptcy or insolvency and prohibiting institutions from issuing covered bonds except within such framework. 3 The other creditors are exclusively the swap counterparties and service providers to the Programme, as described below in footnote 12. 4 The partnership agreement permits the addition of a limited partner if it sells mortgage loans to the Guarantor LP. The Bank shall admit only affiliates of the Bank as additional limited partners of the Guarantee LP.

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Guarantor LP to the Liquidation GP are further limited to a maximum of $30,000 annually by the Guarantor LP Agreement. To date, the Covered Bonds that have been issued have been, and it is anticipated that Covered Bonds offered on a registered basis will be, rated in the highest long-term category by each of Standard & Poor's Credit Market Services Europe Ltd., Moody's Investors Service Inc., Fitch, Inc. and DBRS Limited (collectively, the "Rating Agencies"). Payments of principal and interest under the Covered Bonds are made by the Issuer prior to a default under the Covered Bonds or the Programme, which would include (i) a failure ofthe Issuer to pay principal and interest within a specified period following the date on which such payments are due, (ii) the failure of the Issuer to comply with any other obligation ofthe Issuer (other than the asset coverage test), (iii) the insolvency ofthe Issuer or (iv) a failure to meet the asset coverage test (calculated as described below) within a specified period (each, an "Event of Default"). Upon the occurrence of an Event of Default, the Bond Trustee may,S or upon the passing of a resolution by a specified minority percentage of all ofthe Covered Bond holders shall,6 deliver a notice of acceleration to the Issuer and a notice to pay to the Guarantor LP, which would result in the Covered Bonds accelerating and becoming immediately due and payable by the Bank (a "Covered Bond Guarantee Activation Event") and, concurrently, the Guarantor LP being required to make scheduled payments on the Covered Bonds. The occurrence of certain events after a Covered Bond Guarantee Activation Event will constitute an event of default under the Guarantee (a "Guarantor LP Event of Default"), including a failure of the Guarantor LP to pay principal and interest within a specified period following the date on which such payments are due, the insolvency ofthe Guarantor LP or a failure to meet the amortization test (calculated as described below) within a specified period. Upon the occurrence of a Guarantor LP Event of Default, the Bond Trustee may, or upon the passing of a resolution by a specified minority percentage of all ofthe Covered Bond holders shall/ deliver notice to the Guarantor LP, which would result in the Covered Bonds accelerating and becoming immediately due and payable by the Guarantor LP (the "Guarantee Acceleration Event"), and the Bond Trustee will be entitled to exercise its rights to the Cover Pool under its security interest and make payments to Covered Bond holders 5 This discretion on the part ofthe Trustee is consistent with Section 6.02 ofthe Revised Model Simplified Indenture published in 55 Bus. Law. 1115 (2000). 6 Provided that in circumstances other than a failure to pay, the Bond Trustee has determined that such event is materially p!,ejudicial to the interests ofthe holders ofCovered Bonds of any series. 7 Ibid.

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and certain other creditors under the Programme, all in accordance with pre-established priorities of payment. The Cover Pool of the Guarantor LP consists of residential mortgage loans originated by the Bank and may from time to time include other permitted assets. 8 The Guarantor LP uses the proceeds of an intercompany loan (the "Intercompany Loan,,)9 from the Bank to purchase the residential mortgage loans in the Cover Pool. In addition to the residential mortgage loans and the other permitted assets, the Guarantor LP's assets include an interest rate swap agreement, a covered bond swap agreement for each series of Covered Bonds and the GDA and Standby GDA (as defined below). Prior to a Covered Bond Guarantee Activation Event interest cash flows are exchanged under the interest rate swap agreement to pay interest on the Intercompany Loan. 10 Pursuant to the terms of an agreement (the "GDA") with the Bank, funds of the Guarantor LP deposited in an account with the Bank (the "GDA Account") benefit from a guaranteed rate of interest. I I The Guarantor LP also has in place arrangements with a standby bank (the "Standby Bank") to which its funds would be transferred in the event of a downgrade in the ratings of the Bank below certain thresholds. In such circumstances, under an agreement (the "Standby GDA") with the Standby Bank, the funds deposited in an account (the "Standby GDA Account") with the Standby Bank are entitled to the same guaranteed rate of interest as under the GDA. 8 See footnotes 14 and 15 and the accompanying text. 9 The Intercompany Loan consists of a guarantee loan ("Guarantee Loan" ) and a demand loan ("Demand Loan"). The Guarantee Loan is in an amount equal to the outstanding amount of Covered Bonds plus the overcollateralization amount required in the Cover Pool to satisfy the asset coverage test. The amount of the Demand Loan is equal to the amount of the Intercompany Loan less the amount of the Guarantee Loan. 10 The obligation of the Guarantor LP to make payments under the interest rate swap agreement is conditional upon the interest rate swap provider not having been subject to an event of default or potential event of default that is continuing. As a result, where such circumstances exist, the Guarantor LP is not required to make payments to the interest rate swap provider and can use Cover Pool collections to make payments on the Covered Bonds when due in accordance with the relevant priority of payments or to enter into alternative arrangements to provide for such payments. 11 The guaranteed interest rate under the GDA and Standby GDA is a variable rate of interest agreed by the Guarantor LP and the provider ofthe GDA or the Standby GDA that is not less than 0.10% below the average of the rates per annum for Canadian Dollar bankers' acceptances having a term of 30 days.

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Prior to the occurrence of an Event of Default, the asset coverage test is calculated monthly to measure the Cover Pool and is designed to ensure that at all times the Guarantor LP owns an outstanding principal amount of non-defaulted eligible residential mortgage loans or other permitted assets exceeding the aggregate principal amount of outstanding Covered Bonds by a specified percentage of over-collateralization. The overcollateralization requirement built into the asset coverage test is intended to ensure the Cover Pool is sufficient to make scheduled payments of principal and interest on the Covered Bonds in the event of a Covered Bond Guarantee Activation Event and to repay the Covered Bonds at their maturity, notwithstanding the insolvency ofthe Bank at any time. Arithmetic testing is conducted from time to time on the asset coverage test calculations by Deloitte & Touche LLP, as asset monitor (the "Asset Monitor") under the Programme. Following a Covered Bond Guarantee Activation Event, the asset coverage test is no longer applied and instead an amortization test is applied to determine whether the Cover Pool is sufficient to satisfy the scheduled payment obligations on the outstanding Covered Bonds. The amortization test does not incorporate any requirement for overcollateralization, but rather tests whether the principal balance of the Cover Pool, reduced by a negative carry factor, exceeds the principal amount ofthe outstanding Covered Bonds. A failure ofthe amortization test is a Guarantor LP Event of Default, which results in the outstanding Covered Bonds accelerating and becoming immediately due and payable by the Guarantor LP. In the event that a residential mortgage loan in the Cover Pool defaults, it is no longer included in determining whether the asset coverage test or amortization test is met. If the asset coverage test is not met, as a result of residential mortgage loans defaulting, being paid down or otherwise, the Issuer and the Guarantor LP must facilitate the transfer of additional eligible residential mortgage loans or other permitted assets to the Guarantor LP in order to keep the Cover Pool in compliance with the asset coverage test and avoid an Event of Default. If, after the occurrence of a Covered Bond Guarantee Activation Event, the amortization test is not met, the Covered Bonds will accelerate and become immediately due and payable by the Guarantor LP. The Cover Pool secures the guarantees of all outstanding series of Covered Bonds issued under the Programme. If an Event ofDefault occurs for one series of Covered Bonds, an Event of Default occurs for all other outstanding series of Covered Bonds immediately without any further action ofthe Bond Trustee or the Covered Bond holders. The Guarantor LP currently has no assets other than residential mortgage loans and other permitted investments, cash, swap agreements, commitments in respect ofthe GDA and Standby GDA and other rights relating to the Programme. The
Guarantor LP has no liabilities or claims outstanding against it other than those relating to the Programme, which consist of its Guarantee of outstanding series of Covered Bonds, its obligations under the

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Intercompany Loan, the swap agreements, and in respect of its obligations to service providers to the Programme. 12 The ability ofthe Guarantor LP to perform on the Guarantee following a Covered Bond Guarantee Activation Event is essentially entirely dependent on collections or proceeds received from the residential mortgage loans and other permitted investments that it owns in the Cover Pool or the sale thereof and its entitlements under the swap agreements and the GDA and Standby GDA. The Guarantor LP's other assets, the swap agreements, the GDA and Standby GDA, are not a substantial portion of the assets of the Guarantor LP and are designed (i) to convert the interest received on the residential mortgage loans to the cash flow required to make interest payments on the Intercompany Loan prior to a Covered Bond Guarantee Activation Event, (ii) in the event of a Covered Bond Guarantee Activation Event to convert the cash flows from the interest rate swap into the currency and rate of interest payable on the Covered Bonds, and (iii) when applicable, to provide a temporary investment for principal collections on the residential mortgage loans following a Covered Bond Activation Event and for proceeds of the residential mortgage loans in the event they are required to be sold prior to the maturity of the Covered Bonds, respectively. The exchange of cash flows under the covered bond swaps (being currency and/or interest swaps) only occurs following a Covered Bond Guarantee Activation Event. Interest collections on the mortgage loans in the Cover Pool, prior to a Covered Bond Guarantee Activation Event, are applied to: (i) amounts due to third parties, (ii) interest due on the Demand Loan, (iii) fees to service providers, (iv) amounts due to the interest rate swap provider, (v) interest due on the Guarantee Loan, (vi) the Reserve Fund Required Amount13 held in the GDA Account, (vii) swap termination payments, (viii) indemnities and (ix) distribution to the limited partner as profit. The principal collections on the mortgage loans in the Cover Pool, prior to a Covered Bond Guarantee Activation Event, are applied by the Cash Manager from time to time to (i) pay principal due on the Demand Loan, (ii) acquire additional mortgage loans from the Bank as needed to satisfy the asset coverage test and (iii) thereafter in the discretion ofthe 12 The service providers are the Bond Trustee, the Asset Monitor, Computershare Trust Company of Canada in respect of corporate services provided for the Liquidation GP, the providers of the GDA and Standby GDA, who also provide a bank account and a commitment to provide a standby bank account, respectively, without guaranteed interest rates, the Cash Manager, the Servicer and the issuing, paying, transfer and exchange agents and registrar in respect of the Covered Bonds. The Bank is not paid fees as Cash Manager or Servicer (the mortgage loans having been sold to the Guarantor LP on a fully serviced basis) under the
relevant agreements. 13 Following a downgrade of the Bank below a specified rating, an amount equal to three months of interest on the outstanding Covered Bonds plus one month's expenses; otherwise, zero.

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Guarantor LP or the Cash Manager to acquire Substitute Assetsl4 up to the prescribed limit and/or Authorized Investments. IS The remaining balance of principal collections is deposited in the GDA Account or Standby GDA Account, as applicable, as necessary to satisfy the asset coverage test and then applied to make any payments due or to become due on the Guarantee Loan. If any amount remains, it may be used to make capital distributions to the partners ofthe Guarantor LP. After a Covered Bond Guarantee Activation Event, the interest collections and the principal collections on the mortgage loans are deposited in the GDA Account or Standby GDA Account, as applicable, until needed to make payments under the Guarantee Priority of Payments, including interest due on the Covered Bonds and principal payments on the Covered Bonds or the conversion of the collections under the currency swaps to the currency and interest rate required to make interest and principal payments on the Covered Bonds when due. The structure and operation of the Covered Bonds is depicted in the following diagram:
14 Substitute Assets consist of: "The classes and types of assets from time to time eligible under the Capital Requirements Directive to collateralise covered bonds which, as of the date of this document, include the following, provided that the total exposure to such Substitute Assets shall not exceed 10 percent of the (Canadian Dollar Equivalent of the) aggregate Principal Amount Outstanding ofthe covered bonds: (a) exposures to institutions that qualify for a 10 percent risk weighting under the Standardised Approach; (b) exposures to institutions that qualify for a 20 percent risk weighting under the Standardised Approach; and (c) Canadian Dollar denominated residential mortgage backed securities provided that such class of investments have received Rating Agency ConfIrmation ...." Although the defmition of assets eligible under the Capital Requirements DefInition may change over time, the Bank will not use a defInition that is less restrictive than the defmition in effect at the date of the fIling of the Registration Statement. 15 Authorized Investments consist of: "Investments of a type or class for which Rating Agency ConfIrmation has been received, including for example, short-term provincial and federal bonds and money market securities."

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Royal Bank of
Canada
Mortgage Loans and
Interest Rate Royal Bank of Related Security Swap Provider Canada Consideration I I '--S_e'_'e_r;-------/-1Guarantor LP.'If--~I=::::;--~IIR~O;y;;aI8B~an;;kk~o;tfI Canada Covered Bond Swap Provider' Repayment of Intercompany Loan Intercompany Loan Trust Deed (incl.

Covered Bond

Guarantee) and

Royal Bank of Security Agreement
Canada
Issuer / Bank
Bond Trustee
Covered proceerd_s
Bond
-'-...L-_B_O~---,~~~ C ~
Covered I.
Bondholders 1
'Cashflows under the Covered Bond Swap Agreement will be exchanged only after the occurrence of a Covered Bond Guarantee Activation Event ' D. Ownership Structure of the Guarantor LP The Bank is the sole limited partner ofthe Guarantor LP and holds 99.95 percent of the interests in the Guarantor LP. The Managing GP (a wholly owned subsidiary of the Bank) and the Liquidation GP own 99 percent and one percent, respectively, as general partners ofthe remaining .05 percent interest in the Guarantor LP. Accordingly, the Bank owns directly and indirectly 99.9995 percent ofthe interests in the Guarantor LP. In addition, prior to the Liquidation GP assuming the role of the Managing GP as a result of a Covered Bond Guarantee Activation Event or insolvency of the Managing GP, any distributions from the Guarantor LP to the Liquidation GP are limited to the lesser of $30,000 annually and the Liquidation GP's pro rata portion of any such distribution with any excess allocated to the Bank as sole limited partner, and following such event, such distributions will be pro rata based on the Liquidation GP's interest. A new limited partner may be admitted to the Guarantor LP provided it is an affiliate ofthe Issuer, subject to meeting certain conditions precedent including (except in the case of a subsidiary of a current limited partner) but not limited to, receipt of confirmation of the

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then-current ratings of the Covered Bonds from the Rating Agencies, provided they are then rating the Covered Bonds. The Managing GP is a wholly owned subsidiary ofthe Bank. The directors and officers ofthe Managing GP are officers and employees ofthe Bank. Ninety-one percent of the issued and outstanding shares in the capital ofthe Liquidation GP are held by Computershare Trust Company of Canada, as trustee ofthe LGP Trust16 and nine percent of the issued and outstanding shares in the capital ofthe Liquidation GP are held by the Bank. A majority ofthe directors of the Liquidation GP are appointed by Computershare Trust Company of Canada, as trustee ofthe LGP Trust, and are independent of the Bank. The Bank is entitled to have one nominee on the board ofthe Liquidation GP who is an officer or employee of the Bank. Other than in respect ofthose decisions reserved to the partners in certain limited circumstances described below, the Managing GP will manage and conduct the business of the Guarantor LP and will have all ofthe rights, power, and authority to act at all times for and on behalf ofthe Guarantor LP (provided that a voluntary liquidation of the Guarantor LP would require the consent of the Liquidation GP). Under certain circumstances, including a Covered Bond Guarantee Activation Event or insolvency or winding-up of the Managing GP, the Liquidation GP will assume the management responsibilities ofthe Managing GP.
III. Registration of the Covered Bond and Guarantee Offering on Form F-3
In anticipation of establishing a registered Covered Bond offering program in the United States, the Bank would file the Registration Statement in order to register, pursuant to
Section 5 ofthe Securities Act, the offer and sale ofthe Covered Bonds and the Guarantee on
a delayed or "shelf' basis as contemplated by Securities Act Rule 415(a)(1)(x). The Bank and the Guarantor LP would be co-registrants on the Registration Statement. For the policy reasons that we outline in this letter, we believe that the Guarantor LP should be permitted to use the Registration Statement filed by the Bank to register the Guarantee, so that the Covered Bonds and the related Guarantee. could be offered and sold on a delayed basis pursuant to the Registration Statement. 17 16 The beneficiary ofthe LGP Trust is one or more charities registered under the Income Tax Act (Canada). 17 The Covered Bonds offered and sold pursuant to the Registration Statement will be governed by the Trust Deed, which will be amended to comply with the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and will be qualified under the Trust Indenture Act when the Registration Statement is declared effective. The Trustee under the Trust Deed will be eligible to serve as a trustee under the Trust Indenture Act and will be so qualified.

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The Bank, which is a "foreign private issuer" as that term is defined in Rule 405 under the Securities Act, meets the registrant requirements set forth in Instruction LA. of Form F-3, as follows:

The Bank has a class of securities (its Common Shares) registered pursuant to Section
12(b) ofthe Exchange Act and has filed at least one annual report on Form 40-F.
The Bank (a) has been subject to the requirements of Section 12 of the Exchange Act
and has filed all the material required to be filed pursuant to Sections 13, 14 or 15(d) ofthe Exchange Act for a period of at least twelve calendar months immediately preceding the filing ofthe Registration Statement, and (b) at the time the Registration Statement is filed, will have filed in a timely manner all reports required to be filed during the twelve calendar months and any portion of a month immediately preceding the filing of the Registration Statement.
Neither the Bank nor any of its consolidated or unconsolidated subsidiaries have,
since the end oftheir last fiscal year for which certified financial statements ofthe Bank and its consolidated subsidiaries were included in a report filed pursuant to
Section 13(a) or 15(d) of the Exchange Act: (a) failed to pay any dividend or sinking
fund installment on preferred stock; or (b) defaulted (i) on any installment or installments on indebtedness for borrowed money, or (ii) on any rental on one or more long term leases, which defaults in the aggregate are material to the financial position ofthe Bank and its consolidated and unconsolidated subsidiaries, taken as a whole. The Bank satisfies the transaction criteria as set forth in Instruction LB.1 of Form F3, as the aggregate worldwide market value ofthe Bank's outstanding voting and non-voting common equity held by non-affiliates is over $75 million. It is also contemplated that the Guarantor LP will be a co-registrant with the Bank with respect to the Covered Bonds, given that the Guarantor LP is providing the Guarantee with respect to the Bank's Covered Bond obligations, as described above. 18 The Guarantor LP does not have a class of securities registered under Section 12(b) or Section 12(g) of the Exchange Act, and does not file current and periodic reports pursuant to Section 13 and 15( d) ofthe Exchange Act. However, given the particular structural elements of the Covered Bonds and the Guarantee that serve to enhance the protection of investors in the Covered Bonds, as well as the disclosure that will be provided with regard to the Guarantor LP and 18 The Bank is the sole limited partner ofthe Guarantor LP and holds substantially all ofthe interests in the Guarantor LP. See footnote 4 and the accompanying text.

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the Cover Pool (discussed below), the Bank and the Guarantor LP should be permitted to register the offer and sale, on a delayed basis, of the Covered Bonds and the Guarantee, respectively, on a Form F-3, even though the Form F-3 eligibility requirements are not satisfied with respect to the Guarantor LP and the Guarantee. A. Characteristics of the Guarantee The Guarantee is unconditional and irrevocable as to payments ofinterest and principal under the Covered Bonds when such amounts become due for payment where such amounts would otherwise be unpaid by the Bank. 19 The only condition to the Guarantor LP being required to pay the amount on the Guarantee is that an Event of Default has occurred and notice to pay has been delivered to the Guarantor LP by the Bond Trustee in its discretion or as directed by a resolution of a specified minority of the outstanding Covered Bonds. The purpose of the Guarantee, and the security granted in respect of the Guarantor LP's obligations under the Guarantee, is to provide full security for the Bank's obligations under the Covered Bonds in the event that the Bank is unable to meet those obligations. The Guarantee is designed to be available, funded and secured, and to pay the full amount ofthe Bank's obligations on the same payment schedule under the Covered Bonds in the event the Bank defaults. Moreover, the reason for the Guarantee and monthly asset coverage test calculations, overcollateralization requirement and amortization test (each described above) is to ensure that the Guarantor LP has sufficient assets to be able to pay the Covered Bonds to their maturity in accordance with their terms in the event that the Bank defaults. If at any time a notice to pay is delivered to the Guarantor, the Guarantor would hold a pool of nondefaulted mortgage loans with overcollateralization that should be sufficient to pay scheduled principal and interest on the Covered Bonds through their maturity. And if, after delivery of a notice to pay, the performance of the mortgage loans in the Cover Pool deteriorates to the point that the amortization test fails to be met, all Covered Bonds are accelerated and due immediately and will be paid on a pro rata basis. The Guarantee, as supported by the Cover Pool, provides an added level of security for the payment of the Covered Bonds. B. Disclosure Considerations As discussed above, the Bank is primarily liable for the Covered Bonds, with the Guarantee and the security ofthe Cover Pool serving as a security device for the remote contingency ofthe Bank's insolvency. We believe that the presence ofthe Cover Pool 19 We acknowledge that, while the Guarantee provides full security for the Bank's obligations under the Covered Bond, the Guarantee would not be considered a "full and unconditional" guarantee as defined in Rule 3-10 of Regulation S-X.

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consisting ofresidential mortgage loans owned by the Guarantor LP for the purpose of funding payments of interest and principal under the Covered Bonds when such amounts become due for payment, where such amounts would otherwise be unpaid by the Bank, makes information about the Cover Pool itself of significant importance to investors in the Covered Bonds. The purpose ofthe Guarantee and ultimately the assets in the Cover Pool is to provide a readily available, funded and secured means by which to pay the full amount of the Bank's obligations on the same payment schedule under the Covered Bonds in the event that the Bank defaults. For that reason, we believe that, at a minimum, an asset disclosure template similar to those used for revolving master trusts would be the appropriate disclosure regime for describing the Guarantee and the Guarantor LP which holds the Cover Pool. While we do not believe that the Covered Bonds are asset-backed securities, nonetheless Regulation AB and other applicable disclosures specified in this letter appear to provide the appropriate guidance for disclosure ofthe Cover Pool in the Registration Statement and, as applicable, in subsequent periodic reports filed under the Exchange Act, and will, we believe, provide investors with all material information regarding the Covered Bonds, the Guarantee and the Guarantor LP. Accordingly, we believe the separate financial statements of the Guarantor LP are not material to an investment decision and therefore do not need to be included in the Registration Statement or in any subsequent periodic or current reports. For all ofthese reasons, the Bank and the Guarantor LP will, at a minimum, provide disclosure of material information with respect to the Cover Pool, consistent with the applicable disclosure requirements specified in Regulation AB. The disclosure that will be provided in the Registration Statement, and as applicable in subsequent reports (in addition to all required information that will be provided with respect to the Bank) is, at a minimum and not limited to, the following:

Information regarding repurchases and replacements in the Cover Pool, in
accordance with Item 1104(e) of Regulation AB;
Static pool information regarding assets in the Cover Pool, in accordance with
Item 1105(b) of Regulation AB;
Information regarding the servicing of the assets in the Cover Pool by the Bank,
in accordance with Item 1108 of Regulation AB (including filing the servicing agreement as an exhibit);
Information regarding the originator ofthe assets in the Cover Pool, in
accordance with Item 1110 of Regulation AB;
Information regarding the assets in the Cover Pool, in accordance with Item 1111
of Regulation AB;

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Information regarding significant obligors of assets in the Cover Pool, in
accordance with Item 1112 ofRegulation AB;
Information regarding certain derivative instruments in the Cover Pool, in
accordance with Item 1115 of Regulation AB;
Information regarding reR0rts and additional information in accordance with Item
1118 of Regulation AB;2
Distribution and pool performance information for the Cover Pool, in accordance
with Item 1121 ofRegulation AB, including any additional information that is provided in monthly investor reports provided regarding the Cover Pool (to be included in reports filed on Form 10-D, as discussed below);
Information regarding compliance with applicable servicing criteria in accordance
with Item 1122 of Regulation AB (to be included in an annual report on Form 10 K, as described below); and
A servicer compliance statement in accordance with Item 1123 of Regulation AB
(to be included in an annual report on Form 10-K, as described below).
The Bank would continue to file periodic reports and furnish current reports with the Commission under the Exchange Act. The Guarantor LP will provide ongoing disclosure regarding the Guarantee and the Cover Pool in reports on Form 10-D, Form 8-K and Form 10-K. The certifications specified in Item 601(b)(31)(ii) of Regulation S-K will be provided with the Form 10-K. Based on the foregoing, we believe that the Bank and the Guarantor LP should be eligible to register the offer and sale of the Covered Bonds and the related Guarantee on the Registration Statement. 20 Consistent with the current monthly reporting to investors under the Programme, the Guarantor LP will undertake to file with the Commission a copy of its monthly report to investors by the 15th of each calendar month.

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V. Conclusion
On the basis of the facts and representations set forth above, we respectfully request that the staff of the Division concur with the views expressed herein and provide to the Bank an interpretive or no-action letter response addressing the matters discussed herein at the staffs earliest convenience.

Seven additional copies of this letter are enclosed pursuant to Securities Act Release No. 33-6269. Please feel free to contact the undersigned at 202-887-1563, or Jerry Marlatt at 212-468-8024, with any questions that you may have regarding the foregoing. Very truly yours, ~ David M. Lynn cc: Raquel Fox Office of Capital Market Trends Division of Corporation Finance United States Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Janice Fukakusa, Chief Administrative Officer and Chief Financial Officer Rod Bolger, Senior Vice-President, Finance & Controller James Salem, Treasurer & Senior Vice-President

Incoming Letter

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