Covered bonds are securities issued by financial institutions, which are
collateralized by cash flows derived from the underlying mortgages or public
sector loans (the cover assets pool) as well as the general-business cash flows of
the originator. Hence, covered bonds exhibit equally the recourse, both against the
issuer and against the underlying collateral pool, and a simplified credit
enhancement mechanism, which is employed to absorb any losses at a level
suitable to reach improved ratings.