250th anniversary of the Pfandbrief: Interview with Marcus Schulte

Marcus Schulte Member of the Board of Managing Directors, Deutsche Pfandbriefbank (pbb)

What role does the Pfandbrief play at your bank as a funding instrument?

Our name pbb Deutsche Pfandbriefbank speaks for itself: Pfandbriefe are our most important funding instrument, and we are one of the biggest issuers – not only in euro but also in USD and GBP.

Even after 250 years, the Pfandbrief does not seem to have lost its appeal. What do you consider to be its main selling point?

Over such a long period of time, a product probably develops many strong points. One of them is that the Pfandbrief has not grown old. It continues to attract a broad investor base and adapts according to their needs. Another is its stability, which benefits investors and issuers in equal measure.

The Pfandbrief has inspired many imitators at the international level over the years, and yet looking at the products in detail, they are constructed very differently. Would it not be better for issuers and investors if one covered bond were just like any other?

The existence of different rules means product diversity, and the Pfandbrief’s high standard is a unique distinguishing feature. That is something I would not want to lose, an advantage I would be unwilling to give up.

Your bank has already used senior preferred bonds, a funding instrument that has been available since mid-2018. What has been your experience with them?

Senior preferred bonds are uncovered bonds, which is why they cannot replace the Pfandbrief. Since they are better placed in the liability cascade, however, they are more attractive than senior non-preferred bonds in terms of funding costs. This is why we focus strongly on these bonds for our uncovered funding activities.