Brazil Creates Covered Bond for the Real Estate Market

On 8 October 2014, Brazil enacted Provisional Measure 656 (Medida Provisória 656, or MP 656), creating a new security for Brazilian financial institutions called Letra Imobiliária Garantida (LIG), the local equivalent of covered bonds for the real estate market. The LIG is a debt security with both direct recourse to the issuing financial institution as well as a claim to an asset portfolio (Carteira de Ativos), subject to a fiduciary regime, and issued in book-entry form through the registration in a central depository authorized by the Brazilian Central Bank.

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