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With a history spanning over two centuries, the covered bond system has weathered the financial crisis well. We sat down with Jean-Luc Spetz, Managing Director of EUROHYPO Luxembourg and member of the ABBL Board of Directors, to discuss the world of covered bonds and the specificities of the Luxembourg lettre de gage.
ABBL: For the uninitiated, could you briefly explain what a covered bond is and how it works?
Jean-Luc Spetz: A covered bond is a debt security issued by a bank, which is guaranteed by a cover pool that is specifically allocated to this type of securities. The most important mechanism is the preferential claim that the holder of a covered bond has on the collateral assets in the cover pool. These assets are either real estate...
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