250th anniversary of the Pfandbrief: Interview with Sascha Klaus

Sascha Klaus Chairman of the Board of Managing Directors, Berlin Hyp

What role does the Pfandbrief play in your bank’s funding strategy?

The mortgage Pfandbrief is by far the most important funding instrument at our bank. Year for year, around two-thirds of all our bond issues are Pfandbriefe. You could say our motto at Berlin Hyp is: What can be refinanced through Pfandbriefe is refinanced through Pfandbriefe.

Even after 250 years, the Pfandbrief doesn’t seem to have lost any of its appeal. What do you consider to be its greatest strength?

The Pfandbrief has a lot going for it. But if I had to choose the main aspect, it would certainly be its safety.

The sustainability topic is garnering a great deal of attention. Your bank is one of the issuers that have been active in the Pfandbrief market from the outset. What, in your view, constitutes a sustainable Pfandbrief? And how does it differ from a normal Pfandbrief?

In April 2015 we became the first bank in the world to bring a green Pfandbrief to market. That issue was followed by five further Berlin Hyp green bonds. At present the outstanding volume at Berlin Hyp comprises three green Pfandbriefe and three green senior unsecured bonds with a nominal amount of €3 billion. Irrespective of whether they are Pfandbriefe or uncovered bonds, our green bonds are always used to refinance sustainable, energy-efficient commercial properties. We have defined maximum levels of permissible energy consumption for each category of building. These must not be exceeded if an asset is to be included in our green finance portfolio. In each case, a new green bond can only be issued if there are sufficient suitable green assets on the bank’s balance sheet or in its mortgage cover pool. At the same time, each issue comes with the promise to do what we can during the term of the green bond to invest an amount equivalent to the proceeds of the issue in new green assets.  

Berlin Hyp has already used senior preferred bonds, a funding instrument that has been available since mid-2018. What has been your experience with it?

Berlin Hyp was the first German bank to make use of the new funding instrument. That was in August 2018. Since then we have already issued two senior preferred bonds in benchmark format – at very attractive conditions. The new breakdown into senior preferred and senior non-preferred helps us to lower our funding costs; with a MREL ratio of currently almost 80%, we will be able in the foreseeable future to confine ourselves to the considerably more favorable preferred instrument for our benchmark issues. But the product is not in competion with the Pfandbrief.