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Covered bonds application criteria

This page sets out application criteria for the acceptance of covered bonds in our domestic operations.

Information required

  • Background on the issuer (including all ratings).
  • Details of the issue as per an issue notice, prospectus and/or information memorandum. This information should include: 
    • full legal name of issuer
    • physical and postal address
    • description
    • issue size
    • pricing convention (full details)
    • currency
    • trustee
    • asset monitor
    • arranger
    • dealers
    • registrar
    • paying agent
    • term
    • clearing system
    • governing law
    • redemption
    • payments and record date
    • listing (stock exchange if any).


Confirm the issue meets the following criteria:

  • The issues have a long-term AAA rating from at least two acceptable rating agencies. Where there are more than two agencies rating the issue, at least two agencies must rate the issue as AAA, and no rating be lower than AA+.
  • The issuer has a credit rating from at least two acceptable rating agencies.
  • The asset pool consists of New Zealand-originated, first registered mortgages on New Zealand residential properties.
  • The mortgages that exist as security for the bond are owned by a special purpose vehicle (SPV) that is bankruptcy remote from the originator.
  • The loan-to-value ratio (LVR) for each individual mortgage does not exceed 80%. Mortgages with LVRs that exceed the 80% level will be removed from the cover pool and replaced with qualifying mortgages.
  • For all loans included in the pool the originator has, before loan approval and as part of the loan origination and approval process, documented, assessed and verified the ability of the borrower to meet their repayment obligations.
  • Only loans that are performing have been included in the pool (non-performing loans are those that are 90 days or more past due).
  • ‘Asset monitors’ independent from the trustee and the originator will verify calculations relating to asset coverage tests and any other key ratios and provide these, and any other relevant reports, to us on a regular basis.
  • Covered bond pricing will be available on at least 80% of days via the NZFMA's NZ Credit Market Daily Pricing Service. Pricing will be available at all month ends.
  • The issue's pricing convention follows our price and yield formulae—in particular fixed rate bonds must have either a quarterly or semi-annual coupon. You can find formulas in the appendices of the operating rules and guidelines.
  • The issues are denominated in New Zealand dollars.
  • Covered bonds are lodged and settled in NZClear. Eligibility criteria for lodgement into NZClear include having a suitable registrar and paying agent (not the Reserve Bank).

Other considerations

Covered bonds are repo eligible on a two-name basis only.

We will apply the fixed haircut to the market value of the securities delivered to us as collateral.

Read more about eligible securities and haircuts

Resident withholding tax certificate

As is usual for securities in NZClear, only NZClear members with a valid resident withholding tax certificate are allowed to hold these securities in the NZClear depository.

Subsequent issues of the same security will not require our approval.

Right of refusal

We reserve the right to refuse an application for any reason and do not have to disclose our reasons. In particular, if the credit rating of the issuer/issue falls below our threshold, then the issue will no longer be eligible in our market operations.

Authorised signatories

Authorised signatories of the issuer must sign the information provided above. We require a list of authorised signatories for the issuer and receive satisfactory evidence both in form and substance that the issuer's authorised signatories have the authority to execute this agreement, any other notice or communication issued about this agreement on behalf of the issuer, as well as to make the representations on behalf of the applicant required in the attestation.

Where to apply

Email applications to [email protected]