Pfandbrief
| Securities |
|---|
 |
The Pfandbrief (plural: Pfandbriefe), a mostly triple-A rated German bank debenture, has become the blueprint of many covered bond models in Europe and beyond. The Pfandbrief is collateralized by long-term assets such as property mortgages or public sector loans as stipulated in the Pfandbrief Act. Total volume outstanding in Pfandbriefe was EUR 806 billion as at end-2008.[1] Pfandbrief bonds make up the third largest segment of the German bond market after public sector bonds and unsecured bank debt.
A survey of European Pfandbrief-like products was issued in 2005 by the Bank for International Settlements;[2] the International Monetary Fund in 2007 issued a study of the covered bond markets in Germany and Spain,[3] while the European Central Bank in 2003 issued a study of housing markets, addressing also mortgage markets and providing a two-page overview of current mortgage systems in the EU countries.[4]
History
The roots of the German Pfandbrief system reach back to the year 1769. In the aftermath of the
German Pfandbrief legislation
The Pfandbrief Act (Pfandbriefgesetz), established in 2005 and amended in 2009, regulates the Pfandbrief. While most European countries have covered bond legislation, the United States and UK initially preferred non-legislative guidelines. The 2005 Pfandbrief Act increased potential issuers to include all licensed credit institutions that meet certain requirements. Formerly, only specialized private mortgage banks and public sector banks could issue covered bonds in Germany. The Pfandbrief Act supersedes all prior existing Pfandbrief legislations. The 2009 amendment introduced the Aircraft Pfandbrief as the fourth Pfandbrief type.
Pfandbrief characteristics
In their cover business, Pfandbrief banks grant property finance, public sector, ship and aircraft loans. Pfandbriefe have an average maturity of about five to seven years. While Pfandbriefe tend to be associated with
The German covered bond market
Pfandbrief issuers use pfandbriefe to fund loans that are secured by real estate liens, ship or aircraft mortgages or claims against public-sector bodies. Depending on the type of collateralization, these bonds are referred to as Mortgage Pfandbrief (Hypothekenpfandbrief), Public Pfandbrief (Öffentlicher Pfandbrief), Ship Pfandbrief (Schiffspfandbrief) or Aircraft Pfandbrief (Flugzeugpfandbrief). Pfandbrief issuers have three different pfandbrief segments at their disposal: Jumbo pfandbriefe, traditional pfandbriefe and registered pfandbriefe. For the actual placement issuers have the choice between private placements and public offering. With a volume outstanding of EUR 806 billion, the Pfandbrief held a leading place in the European bond markets at year-end 2008. Pfandbriefe made up 22 percent of the German bond market in 2008: 71.9 percent of pfandbriefe were public pfandbriefe, 27.0% Mortgage Pfandbriefe and 1.1% Ship Pfandbriefe. The first Aircraft Pfandbriefe were expected to be issued in 2010.[1]
Pfandbrief-like securities have been introduced in more than 25
Jumbo Pfandbrief
The Jumbo Pfandbrief, first brought to market in 1995, arose from a need to attract international investors to a market that had been largely of domestic interest. Instead of individual banks placing large-volume issues, the Jumbo Pfandbrief allows an issuing syndicate with the goal of marketing Jumbo Pfandbrief issues and of subsequently ensuring market making. A Jumbo Pfandbrief must have a minimum issuance volume of EUR 1 billion. The average issue size of a Jumbo Pfandbrief is about EUR 1.5 billion. A minimum of five market makers is required. Jumbo Pfandbriefe must be listed on the German stock exchange.[7] Total Jumbo covered bonds first-time sales amounted to EUR 161.3 billion in 2007. In 2007, the four biggest jumbo covered bond-issuing countries were France (24.7%), Spain (22.3%), Germany (20%), and the UK (10.7%).[8]
References
- ^ a b Deutsche Bundesbank[self-published source?]
- ^ Mastroeni, O (2005) Pfandbrief-style products in Europe. Bank for International Settlements (BIS): BIS Papers No 5, 22 Jan 2008
- ^ The Use of Mortgage Covered Bonds, Renzo G. Avesani, Antonio García Pascual,and Elina Ribakova. 2007 International Monetary Fund, IMF Working Paper, WP/07/20, January 2007. 23 p.
- ^ European Central Bank: Structural factors in the EU housing markets, March 2003
- ^ German Pfandbrief Association Archived 2006-12-12 at the Wayback Machine
- ^ European Covered Bond Council[self-published source?]
- ^ German Pfandbrief Association; Securitization of Derivatives and Alternative Asset Classes, by Jan Job de Vries Robbé, Paul A. U. Ali, Paul)
- ^ HVB/UniCredit Archived 2008-12-25 at the Wayback Machine
External links
- Association of German Pfandbrief Banks
- The Pfandbrief 2010/2011. Facts and Figures about Europe's Covered Bond Benchmark, published by the Association of German Pfandbrief Banks]
- European Covered Bond Council
- SIFMA announces formation of U.S. covered bonds traders committee