Insolvency Privilege of Pfandbrief Holders
A key component of the safeguarding mechanisms enshrined in the Pfandbrief Act are the provisions contained in § 30 ff. Pfandbrief Act, which regulate what happens to the cover pools and Pfandbriefe in the event of the issuer’s insolvency.
Under this preferential right the cover pools are at the disposal in the first instance of the Pfandbrief creditors and, under certain circumstances, of the derivative creditors in the event of the Pfandbrief Bank becoming insolvent, to satisfy their claims. This means that the Pfandbrief Bank’s insolvency does not affect them. To ensure this preferential right, the Pfandbrief Act provides for an “emergency plan” that is set forth in detail. This is also to apply if, under the German Restructuring Act, a bridge bank is involved (§ 36a Pfandbrief Act).