UK: UK Regulated Covered Bond Regulations 2008 - Summary Of The FSA´s Regulated Covered Bond Sourcebook - Part 3 of 4

To view the entire article please click here.

Keywords: FSA, covered bonds, debt securities, asset pool, UCITs Directive, Capital Requirements Directive, Sourcebook

Originally published March 2008

As mentioned before, the Sourcebook sets out the guidance, directions and rules made by the FSA under the Regulations, which in particular relate to:

  • The registration formalities and requirements;

  • The notification requirements towards the FSA;

  • The FSA's enforcement process and procedures.

This part 3 contains a brief description of the guidance, directions and rules set out in the Sourcebook.

3.1 Registration

In order to issue Regulated Covered Bonds, the issuer and the covered bonds (programme) must be registered in the relevant Register of the FSA. This section 3.1 sets out some practical aspects of the registration procedure of the FSA.

Submission Of Application Form And Payment Of Registration Fees

In order to become admitted to both Registers, the issuer must submit an application for registration form, which:

  • will cover the registration of both the issuer and the covered bond, because the FSA will not consider applications for issuer registration in isolation from the application for registration of the covered bond; and

  • must be submitted for each proposed issuance of covered bonds (even if it is already registered in the Register of Issuers), unless the regulated covered bonds will be issued under a programme (as the UK structured covered bonds issued to date have been). In the latter case, the issuer merely has to notify the FSA of each issuance by submitting a "series issuance notification form"; and

  • will not be considered by the FSA until it has received a registration fee of £25,000 (by way of bankers draft, cheque or credit transfer). This fee is non-refundable (even in case the application is not successful); and

  • must be verified by a senior manager of the issuer, who also has to make a number of required confirmations in the form (such as the confirmation that the arrangements relating to the covered bond or the covered bond programme (as the case may be) comply with the Regulations and the Sourcebook) and consent to the FSA displaying their confirmation of compliance with the Regulations and the Sourcebook on the FSA's website.

Evidence Of Compliance To Be Provided

According to the Sourcebook, the application form must provide the relevant details of the covered bond or the covered bond programme (as the case may be) and demonstrate how each of the requirements of the Regulations and the Sourcebook will be complied with.

In order to enable the issuer to demonstrate this compliance, the Sourcebooks sets out a number of expectations of the FSA in relation to the requirements set out in the Regulations, such as:

  • In order to satisfy the requirement of having an asset pool with sufficient quality (see section 2.4 of part 2 above), the FSA expects the issuer to demonstrate that (i) it has in place appropriate systems, controls, procedures and policies in place and (ii) the cashflows generated by the assets are sufficient to meet payments in a timely manner.

  • In considering the sufficient quality of the asset pool, the FSA will also take account of any over collateralisation to mitigate the asset credit risk, concentration risk, market risk and counterparty risk and consider the loss in the event of a default.

  • The issuer must demonstrate that the covered bond or the covered bond programme (as the case may be) contains provisions that adequately deal with (amongst others):

    • identification and rectification of any breach of the asset pool requirements set out in the Regulations;

    • the appointment of replacement servicers, cash managers or paying agents; and

    • the winding up of the asset pool in case any breach of the asset pool requirements are not rectified in a timely manner.

  • The issuer must obtain written advice and reports regarding the compliance of the issuer and the covered bond or the covered bond programme (as the case may be) with the Regulations and the Sourcebook from suitable independent third party advisers (such as lawyers and accountants) before making an application.

    The Sourcebook also clarifies that the FSA requires legal advice and an auditor's report, each covering a number of listed items. In particular, the FSA expects legal advice to deal with a minimum set of matters required by the Regulations for Regulated Covered Bonds. The following are examples of such matters:

    • bankruptcy remoteness of the transfer of the assets to the owner and that there is no risk of the transfer being recharacterised as a security interest;

    • whether the contractual arrangement for the covered bond transaction limits the property in the pool to "eligible property" as determined by Regulation 2(1) and located in the permitted locations determined by Regulation 2(2);

    • whether the owner is a company registered in the UK and its "centre of main interest" likewise is situated in the UK;

    • whether the security granted over the asset pool by the owner is enforceable;

    • whether the contractual arrangements provide for a priority of payments in the case of winding up of the owner consistent with Regulation 27 (see part 2 of this paper above).

Where assets are situated in jurisdictions outside England and Wales, the FSA expects the issuer to obtain advice on whether the law of those jurisdictions impacts on the enforceability of security and the availability of those assets in relation to matters such as true sale, perfection of security, priority and recognition of insolvency proceedings and foreclosure rights.

3.2 Annual Confirmations Of Compliance

In order to monitor the on-going compliance with the Regulations and the Sourcebook (and in particular, the asset coverage requirements described in section 2.4 of part 2 above), the issuer must send to the FSA an annual written confirmation of compliance.

This annual confirmation of compliance:

  • will be published on the FSA's website;

  • must be preceded by the issuer having obtained and considered written advice or reports from suitable independent third party advisers (such as accountants and lawyers); and

  • must be sent for the first time (covering the period from the registration date up to the confirmation date) to the FSA on the earlier of (i) the date selected by the issuer and (ii) the date 12 months from the registration date. Any subsequent confirmations (covering the period from the last confirmation date to the date of the current confirmation) must be made on the anniversary on the first confirmation date.

If the issuer is in insolvency, the annual confirmation requirements will be imposed on the owner, with the owner having to make an additional confirmation of compliance within one month of the date of insolvency.

3.3. Asset Pool Notifications And Other Notifications

The issuer (or the owner, in case of insolvency of the issuer) must provide the FSA with on-going information about the asset pool. Such information must be provided by completing an asset notification form and delivering this to the FSA within one month of the end of each quarter following the registration date.

The Sourcebook also determines that, in case of a change of the owner or any proposed material changes to the regulated covered bond, the FSA will need to be notified thereof.

3.4 Annual Fees

In addition to the non-refundable registration fees (see 3.1 above), each registered issuer must pay to the FSA a fee of £20,000 for each financial year in which the issuer is on the Register of Issuers (as at 31 March of the previous financial year).

For the first year, the annual fee will be either £20,000, £15,000, £10,000 or £5,000 (depending on the registration date of the issuer).

To view the entire article please click here.

Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Copyright 2008. Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.