Section 2-28 Requirements on the composition of the cover pool

The cover pool may only consist of the following assets:

a) loans secured on residential property, on a document of proprietary lease of a housing unit or on a certificate showing that the lessee owns a share in the housing cooperative that owns the housing structure of which the unit forms part (residential mortgages),

b) loans secured on other real estate (commercial mortgages),

c) loans secured on other registered assets,

d) loans to municipalities and loans guaranteed by the State, a municipality or corresponding public body in other states (public sector loans),

e) assets in the form of derivative contracts which meet further requirements set in regulations,

f) assets which constitute substitute assets under the provisions of the fourth paragraph.

Upon incorporation in the cover pool, loans as mentioned in the first paragraph a) to c) shall not exceed a specified percentage of the value of the mortgaged property (loan-to-value ratio). The King may issue regulations on loan-to-value ratios for different types of assets.

Loans as mentioned in the first paragraph a) to c) must be secured on a capital asset located within the EEA or the OECD area. Public sector loans must have been granted to or guaranteed by a public body as mentioned in the first paragraph d) within the EEA or the OECD area.

Only particularly liquid and secure assets may be employed as substitute assets. Substitute assets may constitute up to 20 per cent of the cover pool at any and all times. Where special conditions are present, SFA may authorise this proportion to constitute up to 30 per cent for a limited period. The King may in regulations lay down supplementary provisions regarding requirements on assets eligible for inclusion in the cover pool, including restrictions on the composition of the cover pool.