What is German Pfandbrief?
What is German Pfandbrief?
Pfandbriefe are a type of covered bonds issued by German mortgage banks that is collateralized by long-term assets. These types of bonds represent the largest segment of the German private debt market and are considered to be the safest debt instruments in the private market. The singular term is ‘pfandbrief. ‘
How does Pfandbrief work?
“Pfandbriefe are a prime example of finance at the service of people’s well-being. “ The Pfandbrief is used by credit institutions to fund certain loans – secured by security rights over real property, ship mortgages, or aircraft mortgages – as well as to fund claims against public sector entities.
What is the difference between covered bonds and asset backed securities?
Unlike asset-backed securities created in securitization, the covered bonds continue as obligations of the issuer; in essence, the investor has recourse against the issuer and the collateral, sometimes known as “dual recourse.” Typically, covered bond assets remain on the issuer’s consolidated balance sheet (usually …
How do covered bonds work?
Covered bonds are debt obligations issued by credit institutions which offer a so-called double-recourse protection to bondholders: if the issuer fails, the bondholder has a direct and preferential claim against certain earmarked assets and an ordinary claim against the issuer’s remaining assets.
Why do banks issue covered bonds?
The issuance of covered bonds enables credit institutions to obtain lower cost of funding in order to grant mortgage loans for housing and non-residential property as well as, in certain countries, to finance public debt. The portfolio investor has the advantage of investing in safe bonds with a relatively high return.
How safe are covered bonds?
Covered bonds are secured senior debt issued by banks. They are collateralised by a pool of assets that remain on the banks’ balance sheet. As a consequence, covered bonds are safe assets for investors and a stable and cheap source of bank funding.
Who can issue covered bonds?
There are two ways to structure covered bonds. The depository institution can issue the covered bonds directly, or a special purpose vehicle (“SPV”) can be established to act as issuer or as guarantor. The covered bond structure used by U.S. issuers utilizes a SPV as an issuer.
When did bonds become covered?
U.S. Treasury Secretary Henry Paulson announced on July 28, 2008, that the Treasury and partner institutions planned to rev up the market for these securities. Bank of America became the first bank issuing dollar-based covered bonds.
Are bonds asset Backed?
Asset-backed securities, called ABS, are bonds or notes backed by financial assets. Typically these assets consist of receivables other than mortgage loans,¹ such as credit card receivables, auto loans, manufactured-housing contracts and home-equity loans.
What is the abbreviation for Pfand brief act?
Pfandbrief Act (PfandBG) Contents Section 1 Field of application, Licence and Supervision § 1 Definitions § 2 Licence § 3 Supervision; requests for information and documentation Section 2 General Provisions concerning Pfandbrief Issuance
What does pfandbg stand for?
Pfandbrief Act (PfandBG) Section 1 Field of Application, Licence and Supervision § 1 Definitions (1)1Pfandbrief banks are credit institutions whose business consists in Pfandbrief business. 2Pfandbrief business is 1.
What is the German Pfandbrief system?
The roots of the German Pfandbrief system reach back to the year 1769. In the aftermath of the Seven Years’ War (1756–1763) that had ravaged the country Prussian King Frederick the Great introduced the Pfandbrief system with a ”cabinets-order” to ease credit shortage for the nobility.
What is an Aircraft Pfandbrief?
The 2009 amendment introduced the Aircraft Pfandbrief as the fourth Pfandbrief type. 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.
