understanding financial jargon
A Covered Bond is a bond which is backed by other assets held by the issuer. This is also known as 'securitised', with the covered bonds cash flows being secured on another asset. For example, a bank may issue a covered bond which is backed by the banks mortgage loan book, with the interest received from the mortgage loans being used to pay the the interest due to the covered bond holders.
In the event that the issuing bank goes into bankruptcy, the covered bond holders may have first recourse to the underlying assets, as well as being ranked before other investors such as shareholders.
What to do if you need more help
If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.
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