Which of the following is true of a covered bond?

Question

Quizplus · Accepted Answer

In case of covered bonds, the obligation of the loan remains with the originating bank that gives out the loan. This means that the bank remains responsible for repaying the bondholders even if the borrower defaults on the loan. This is unlike mortgage-backed securities where the obligation of the loan immediately transfers to the institution taking the loan. Additionally, covered bonds are more popular in Europe than in the United States, making option D incorrect. Option A is incorrect because covered bonds have some structural differences from mortgage-backed securities, such as the dual recourse structure and the asset-liability matching.

Which of the Following Is True of a Covered Bond