Covered bond

Covered bonds are debt securities issued by a bank or mortgage institution and collateralised against a pool of assets that, in case of failure of the issuer, can cover claims at any point of time. They are subject to specific legislation to protect bond holders.^[1] Unlike asset-backed securities created in securitization, the covered bonds continue as obligations of the issuer; in essence, the investor has recourse against the issuer and the collateral, sometimes known as "dual recourse".^[2] Typically, covered bond assets remain on the issuer's consolidated balance sheet (usually with an appropriate capital charge).

As of beginning of 2019 volume of outstanding covered bonds worldwide was euro 2,577 billion, while largest markets were Denmark (€406 bil.), Germany (€370 bil.), France (€321 bil.) and Spain (€232 bil.).^[3]