Explanation:
A covered bond is indeed a method for raising funds by issuing debt securities in the capital markets, much like securitization. The main differences are that the assets remain on the issuer's balance sheet (there is no "true sale" to a bankruptcy-remote SPV) and investors have dual recourse to both the issuer's general cash flows and the cover pool. Therefore, option D states a false difference and is the correct choice.
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312.1. Each of the following is a valid DIFFERENCE between a Covered Bond and a "true securitization" (Malz's⁸ term), except which is NOT TRUE?
A
In a covered bond, the cover pool remains on the balance sheet; but in a true securitization, loans (assets) are removed from the balance sheet
B
In a covered bond, principal and interest (P&I) are paid from issuer's general cash flows; but in a securitization, P&I are paid from the collateral pool directly
C
Unlike a true securitization, there is NOT a "true sale" of assets to a bankruptcy-remote special purpose vehicle in the case of a covered bond
D
Unlike a true securitization, a covered bond neither creates securities nor is a genuine method for raising funds (i.e., borrowing) in capital markets
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