/

ERM Glossary: Covered bond

[this page | pdf | references | back links]

A covered bond is a bond backed by a pool of loans. For example, a covered mortgage bond might be backed by a pool of mortgage loans. The mortgages remain on the issuer’s balance sheet. The issuing bank can generally change the make-up of the loan pool or the terms of the loans to preserve credit quality. Covered bonds thus have a higher risk weighting than mortgage-backed securities because the holder is exposed to both the non-payment of the mortgages and the financial health of the issuer.

 


NAVIGATION LINKS
Contents | Prev | Next


Desktop view | Switch to Mobile