250th anniversary of the Pfandbrief: Interview with Stefan Winter

Stefan Winter President Association of Foreign Banks in Germany, Member of the Management Board of UBS Europe SE

When did you first come into contact with the Pfandbrief?

I think the first time I became aware of the Pfandbrief was when I saw the advertisements for Pfandbriefe and municipal bonds in the famous Rowohlt paperbacks that I used to read, as many children did. But it wasn’t until I embarked on my training and studies that I really understood exactly what the Pfandbrief and this special form of investment involved.

Why are Pfandbriefe now also being issued by a number of foreign banks?

Some foreign banks in Germany have now also become Pfandbrief issuers because the Pfandbrief provides the institutions concerned not only with considerable liquidity and a high level of acceptance, but also with a very cost-effective form of refinancing which is cheaper, for example, than many other forms of bond issues, even if these are secured accordingly.

What factors do you believe will be decisive when it comes to successfully implementing the harmonisation of covered bonds in Europe?

The major challenge associated with implementing the European harmonisation of covered bonds lies, on the one hand, in structuring the harmonisation process in such a way that makes the product even more liquid and also more popular as an investment opportunity, also for international investors, but on the other hand in ensuring that the Pfandbrief standards are not watered down so as to ensure the Pfandbrief’s status as a premium product.

Will the Pfandbrief keep its benchmark position even in a harmonised covered bond market?

A lot will depend on the upcoming harmonisation of the covered bond. If the image and the German overall conditions for the Pfandbrief as a premium product continue to be well and convincingly maintained, then the Pfandbrief will retain its benchmark position. We are confident that the vdp will be successful in pushing this agenda and that the German rules for cover can continue to be designed in such a way that Pfandbrief investors can rely on the liquidity, repayment and interest payments, and that Pfandbriefe can also be used as collateral if necessary.