250th anniversary of the Pfandbrief: Interview with Ane Arnth Jensen

Ane Arnth Jensen Deputy CEO of Finance Denmark, CEO of the Association of Danish Mortgage Banks

What in your view is fundamental for a financial product to
succeed and serve as a role model for 250 years?

Pfandbriefe and other covered bonds are an important source of funding of loans to a wide range of borrowers in Germany, Denmark and across Europe. Borrowers that for instance can use their house as collateral get access to a stable supply of cheap loans funded by Pfandbriefe and other covered bonds. Seen from the investors’ perspective covered bonds provides a unique combination of high-quality bonds with an attractive yield. This is unique for both borrowers and investors and these features have been the cornerstones of the German Pfandbrief system in 250 years and should continue to be the foundation of covered bond systems.

What is the importance of Pfandbrief and peer covered bonds in
financing the real economy?

Loans funded by Pfandbriefe and Danish covered bonds have very competitive interest rates and offer flexibility with regards to for instance amortization and interest rate fixation. The loans help homeowners’ dreams come true and provide finance to businesses. In that respect covered bonds are a very important prerequisite for growth and the creation of jobs in the European economy.

Why will harmonisation of covered bonds in Europe become a success story?

Over the years different covered bond systems have developed across Europe, and many well-functioning covered bond systems exist today. Among those I would naturally mention the German Pfandbriefe and the Danish realkredit-system. The creation of a common legal framework based on high-quality standards and best market practices can help other countries develop a strong covered bonds market and make covered bonds even more attractive for investors across Europe and the rest of the world.

Does innovation, e.g. "use of proceeds" Pfandbrief/covered bonds,
transform the market, how?

The world has changed dramatically over the last 250 years and the assets or real property that can be used as collateral for loans funded by covered bond has also changed over the years. In that respect the covered bond systems have also evolved and innovated, as the society and market has changed over time. It is essential that the loans granted and the collateral that is put up as security for a covered bond loan continues to be of very high quality, so that the quality of covered bonds remains unquestionable. So, I would say that high quality innovation has transformed and will continue to transform the covered bond systems in the future, but it is very important that the well proven basic characteristics of covered bonds remain in place as rock solid foundation to build on.