What do you need to know if you want to invest in covered bonds?
Since the issuing and coverage of covered bonds are bound by strict legal rules and backed by tangible assets (usually property), they are considered particularly secure financial investments. National legislation on covered bonds varies greatly from one country to the next.
In Switzerland, covered bonds are secured at multiple levels. Firstly, they are collateralized by the issuing mortgage bond institution against its own assets. If the institution becomes insolvent, the bonds are covered by the commercial banks that issued the mortgages. If these institutions also collapse, the mortgage debtor has to step in − ultimately, the private or commercial property serves as collateral.