Covered bonds

DNB Boligkreditt AS is the issuer of covered bonds in the DNB Group. The issuer is a wholly owned subsidiary of DNB Bank ASA. The covered bonds issued have been rated AAA/Aaa by Standard and Poor’s and Moody’s. 

A description of the market and governing legislation

A description prepared by the The Norwegian Covered Bond Councel (NCBC) can be found here.

The Norwegian covered bond legislation

Specialised mortgage institutions
The bonds are issued by specialised mortgage institutions which are licensed and supervised by Finanstilsynet (the Financial Supervisory Authority of Norway).

Eligible loans  
  • Mortgages:
    • Residential Property: 75% LTV
    • Commercial Property: 60% LTV (none in DNB Boligkreditt's cover pool)
  • Public sector loans
  • Substitution asset (max 20% of cover pool)

If the market value of the assets in the cover pool declines, the part which exceeds 75% LTV will not be included when calculating the value of the cover pool.

Risk management
Statutory requirements to monitor interest rate, currency and liquidity risk.

Independent inspector
An independent inspector, appointed by Finanstilsynet, will monitor the company's assets and liabilities and its compliance with the Norwegain covered bonds legislation.

Bankruptcy
In the event that the issuing company is declared bankrupt, assets in the cover pool and cash flows from these assets shall be kept separate from the ordinary estate.

The holders of covered bonds and counterparties to derivative contracts shall have preferantial rights to cover from assets and cash flows in the cover pool.

The administrator should seek to ensure that holders of covered bonds and counterparties to derivative contracts receive their contractual payments independent of the bankruptcy order. The administrator may thus sell assets or issue new covered bonds to repay covered bonds upaon maturity.

Risk weighting and eligibility to serve as collateral in central banks
Covered bonds:

  • Assigned a 10% risk weight in Norway
  • Qualify for a 10% risk weight in EU member countries
  • Eligible as collateral for ordinary liquidity loans in Norges Bank (Norway's Central Bank) and the European Central Bank (ECB)