On July 15, the Federal Deposit Insurance Corporation (FDIC) released its final statement of policy regarding the treatment of covered bonds in a conservatorship or receivership. The policy statement clarifies how the FDIC will apply the consent requirements of section 11(e)(13)(C) of the Federal Deposit Insurance Act to covered bonds. The final statement clarifies that “actual direct compensatory damages” due to bondholders for repudiation of covered bonds will be limited to the par value of bonds plus accrued interest, and extends the term limit for covered bonds from 10 years to 30 years. The FDIC, however, declined to (i) expand the definition of “eligible mortgages”, (ii) expand the permitted assets for cover pools to other types of commonly securitized loans and receivables, (iii) change the limit on eligible covered bonds to no more than four percent of an insured depository institution’s total liabilities, or (iv) “grandfather” preexisting covered bonds that do not meet the specific requirements of the policy statement.

http://www.fdic.gov/news/news/press/2008/pr08060a.html