Lettres de Gage Publiques Legal Framework Covered Bond Conference Warsaw EUROHYPO Europäische Hypothekenbank S.A.

Covered Bond Conference Warsaw | 2 | 3 Lettres de Gage: Legal Framework The articles of the law of November 21, 1997 introducing the “lettres de gage” into Luxembourg law were integrated into the law on the financial sector as articles 12-1 to The only amendment until now to these articles took place on June 22, Special banking license for banks issuing “lettres de gage” Investors in “lettres de gage” have a statutory privilege before other creditors of the bank. In the case of bankruptcy of the bank the collateral pool and the corresponding “lettres de gage” will not be part of the bankruptcy estate but will be separated and administered by the Luxembourg Supervisory Authority CSSF (Commission de Surveillance du Secteur Financier) in order to ensure all payments timely. Derivatives have to be included in the cover pool to “hedge” i.e. protect the cover pool against market risks. Creditors of such derivates have the same statutory privilege as the investors. Cover pool is supervised by a “special auditor”. CSSF: strict but helpful by issuing guidance in the case of problems regarding the practical implementation of the law

Covered Bond Conference Warsaw | 3 | 3 Lettres de Gage: Special Auditor The collateral pool is supervised by a “special auditor” that is different from the bank’s independent auditors for the annual accounts. But it needs to have the qualification of such an auditor. The special auditor is independent from the bank and the investors in order to fulfil its control function. Once a year it submits a written report to CSSF. The special auditor is appointed by the CSSF on the recommendation by the bank. The special auditor ensures that the “lettres de gage” in circulation are at all times covered as to the nominal amount and the present value and it constantly monitors the composition of the cover pool. Formal control if the necessary documentation of the assets and the derivates in the cover pool exists and if these assets and derivates are eligible according to the law. In order to confirm the necessary coverage it signs (besides two representatives of the bank) the certificates of “lettres de gage” before their issuance. It has to approve in writing the removal of assets from the cover pool.