# Covered Bond

*Banking & Payments — Finicade finance glossary*

A covered bond is debt issued by a bank and secured on a ring-fenced pool of mortgages that stays on the bank's balance sheet. Investors have dual recourse: to the bank and to the pool. That structure is why covered bonds, unlike mortgage-backed securities, kept trading through 2008 — the issuer must replace bad loans in the pool, so the incentive to originate carelessly never appears.

**Also known as:** Pfandbrief, covered bonds

**Related terms:** [Securitization](https://finicade.com/glossary/securitization), [Mortgage](https://finicade.com/glossary/mortgage), [Wholesale Funding](https://finicade.com/glossary/wholesale-funding), [Credit Rating](https://finicade.com/glossary/credit-rating), [Senior vs Subordinated Debt](https://finicade.com/glossary/senior-vs-subordinated-debt)

Source: https://finicade.com/glossary/covered-bond