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Public Sector Asset Class would include investment-grade securities issued byone or more states or municipalities, loans made to one or more states or

municipalities and loans, securities or other obligations that are insured or

guaranteed, in full or substantially in full, by the full faith and credit of the UnitedStates.

Auto Asset Class would include auto loans or leases and ABS of the same assetclass.

Student Loan Asset Class would include student loans (whether or not such loansare guaranteed) and ABS of the same asset class.

Credit or Charge Card Asset Class would include credit or charge card loans andABS of the same asset class.

Small Business Asset Class would include loans made under a programestablished by the Small Business Administration (whether or not such loans are

guaranteed) and ABS of the same asset class.

Salient features of the covered bond program:

In a cover pool there will not be more than one eligible asset class For each covered bond program there is a need to establish minimum over

collateralization requirement from time to time based on credit, collection and

interest rate risk; established by the covered bond regulator

The covered bond issuer will have to appoint an indenture trustee (unaffiliatedentity) to monitor the cover pool.

The cover poolsecuring the covered bonds shall have to satisfy an asset coveragetest. This test is to be conducted every month by the issuer and the test wouldmeasure whether the assets in the cover pool satisfy the minimum

collateralization requirements. The results of the monthly test are to be disclosed

to the primary Federal regulator, if any, covered bond regulator and thebondholders.

In case the covered bond fails to satisfy the asset coverage test and the failure isnot cured within the time specified in the transaction documents; it would amount

to default and would result in the creation of an estate. The issuer shall submit theschedule of the eligible assets and substitute assets to the indenture trustee on

monthly basis

Creation of estate in case of event of default: The estate created shall be not be taxableas a separate entity and no assets and liabilities shall be a taxable event

1. In case of default and before issuer enters conservatorship, receivership, liquidatingagency or estate in bankruptcy All the applicable assets of the cover pool shall be released to and held by such

estate, free from any right, title, claim of the issuer, conservator, liquidating agent,

receiver or bankruptcy trustee of the issuer

In case the assets of the cover pool are inadequate to fulfill the obligations, thebondholders will have claim against the issuer for the deficiency with respect to

such covered bond or related obligation

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The issuer shall have the residual interest in the estate (if any) Covered bond regulator shall act as the trustee of the estate and appoint and

administer one or more servicer or administrators of the pool. The administrator

will:

o Collect, realize the assets of the poolo Borrow, procure funds for the benefit of the estateo Invest or use the proceeds for making payments for the covered bondso Provide liquidity support if need be

Fees of the servicer, administrator is paid from the estate as approved by thecovered bond regulator

2. Default on conservatorship, receivership, liquidating agency or estate in bankruptcy: In case FDIC is the conservator/ receiver, the Corporation shall have the right to

transfer the cover pool along with the covered bonds and related obligation

secured by such a pool to another eligible issuer that meets all the conditions andrequirements specified in the transaction document, within 15 days from the date

fo such appointment. The transferee shall become fully liable for the coveredbonds upon such transfer

In case no transfer takes place within 15 days an estate shall be automaticallycreated. In such a case the issuer will continue to service the pool for 120 days

from the date of creation of the estate for a fair market value fee

Before this present Act, in 2008, FDIC had issued the first formal guidance on covered

bonds, the "Final Covered Bond Policy Statement" later, in the same year, the

Department of the Treasury published "Best Practices Guide for US Residential CoveredBonds." This Act is the legislative follow-up to Garretts original legislation, The Equal

Treatment for Covered Bonds Act, which was first introduced in 2008. The Covered

Bond Act, 2010 has been welcomed by the industry players and is hoping to be thealternative investment solution for the markets