Covered bonds give the investor a priority right over certain of the issuer's assets in case of bankruptcy and are thus typically considered as a safer investment than other bonds. The assets must be recorded in a special register, they must comply with certain quality criteria and their value must exceed the value of the covered bonds. The Swedish Financial Supervisory Authority (SW: Finansinspektionen) appoints an independent controller to supervise the issuer's compliance with the applicable requirements.

Swedbank Mortgage only lends to real property in Sweden.

The majority of the credit collateral in the register consists of residential property. This means single-family homes, tenant-owned apartments and multifamily dwellings. Only a small part of the portfolio is secured by loans to municipalities and a very limited part is loans secured by commercial real property. This accurately reflects the profile of the total loan portfolio.

As for geographical concentration of the collateral (the properties) in the register, these are well distributed throughout Sweden, mirroring the typical Swedish population density.

The covered bonds of Swedbank Mortgage have been assigned Aaa by Moody's and AAA by Standard & Poor's. To maintain this level, the Company has undertaken that, if its short-term Standard & Poor's rating falls below A-1, the Company agrees, within 30 calendar days of such downgrade, to provide additional liquid assets to the cover pool or to take any other suitable action in order to maintain a sufficient level of liquidity to support the rating assigned to the covered bonds.

Funds originating from the assets in the cover pool, or from derivative contracts or issues of covered bonds, covered bond funds, will be segregated from the company's other funds by being deposited on separate cash accounts in Swedbank AB (publ), Swedbank, on a daily basis. If Swedbank's short-term unsecured, unsubordinated debt rating by Standard & Poors were to decline below A-2, the company would, within 30 days thereof, (i) transfer the covered bond funds to a cash account in another bank with a short-term unsecured, unsubordinated rating from Standard & Poor's of at least A-2 and (ii) re-direct future covered bond funds to a cash account in such bank.