Finance: Covering your assets
Covered bonds have been widely used in continental Europe for centuries, yet completely ignored in the UK and the US until a few years ago. British and American interest in them has recently heightened, with many seeing covered bonds as a possible means of breathing new life into the mortgage financing market. Each of the continental European countries has its own particular covered bond structure, for instance, Pfandbriefe (the oldest type of covered bonds) in Germany and Cedulas in Spain. The essential feature shared by all the variations is that an investor in such an instrument possesses not only a debt claim against the issuer, but also a security interest in a pool of 'cover assets' that places it in a priority position if the issuer becomes insolvent.
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