In 2012, Royal Bank of Canada filed a registration statement with the SEC for covered bonds.  Before filing the registration statement, however, RBC filed a request for no action relief with the SEC to enable RBC Covered Bond Guarantor Limited Partnership, the entity that would hold the cover pool of mortgage loans and guarantee the bonds issued by RBC, to register its guarantee on the same SEC Form F-3 used by RBC to issue the bonds.  Without relief, the Guarantor was ineligible to use Form F-3 as it did not have the required history of filing information with the SEC. 

The SEC granted the requested relief in May 2012 on the condition that RBC and the Guarantor agree to comply with the requirements of specific provisions of Regulation AB.  The list of provisions included Items 1111 and 1121, which were subsequently amended by Reg AB II to require the disclosure of loan-level information.  Because of Items 1111 and 1121 and because the assets in the cover pool held by the Guarantor are residential mortgage loans, RBC will be required to disclose for each offering and monthly thereafter 272 data fields of loan-level information for each loan in its cover pool if it issues SEC-registered covered bonds after November 23, 2016.  Currently there are about 350,000 loans in the RBC cover pool. 

Following the approval of the RBC registration statement by the SEC in 2012, the Bank of Nova Scotia and the Bank of Montreal each filed a no action request with the SEC to establish similar SEC-registered covered bond programs.  The requested no action relief was granted upon similar conditions and the BNS registration statement was approved in September 2013.  BMO withdrew its registration statement prior to approval by the SEC in December 2015. 

Unfortunately for the Canadian banks many of the required 272 data fields are inapplicable to Canadian residential mortgage loans.  Other fields relevant to Canadian loans would have to be added.  And unlike an RMBS transaction, many of the loans in the cover pool are not newly-originated; some of the loans will have been originated 15 or 20 years ago.  In many cases, information of the type required by the SEC was not collected when the loans were originated or if collected was not uploaded to electronic data systems; in that case the information will only be found in physical loan files scattered in offices across the country.  To the extent that the data is not collected for newly originated residential mortgage loans, company-wide systems and procedures would have to be modified in order to obtain the data – an expensive and disruptive process for such large and geographically diverse organizations.