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To: Haim R. Branisteanu who wrote (113254)	7/23/2010 8:53:18 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 116555

In covered bonds you have an additional layer of equity if compared to the US MBS or ABS which enabled higher leverage for assuming same risk. That's interesting.. What "additional layer of equity" would you be referring to? As I've understood it, the only major difference between a covered bond and an ABS is that the assets backing the covered bond remain on the bank's books, where as ABS get sold off as securities or put in an SIV: Covered bonds are similar in many ways to mortgage- and asset-backed securities with one major difference: the loans backing a covered bond remain on the balance sheet of the issuing bank. The bonds are therefore obligations of the issuing bank, and the issuer retains control over the assets. It can change the make-up of the loan pool to maintain its credit quality, which can benefit investors, and it can also change the terms of the loans. By contrast, mortgage- and asset-backed securities are typically off-balance-sheet transactions in which lenders sell loans to special purpose vehicles that issue bonds, thus removing the loans—and the risk associated with those loans—from the lenders’ balance sheets. europe.pimco.com Both instruments draw their revenue from the interest/dividends of the underlying asset. And essentially they are a mechanism for consolidating interest/dividend paying assets (supposedly) of a similar quality into larger instruments that are more easily marketed/sold. From what I heard (not know) to declare BK in the EU is much more difficult than in the US I'll take your word for that, until I obtain better data. But I know we DRAMATICALLY TOUGHENED US BK laws back in 2005. en.wikinews.org But apparently it's still easier for a US corporation to be taken into BK than it is for a US citizen. Hawk