Pfandbriefe are covered bonds issued on the basis of the German Pfandbrief Act (Pfandbriefgesetz, PfandBG). There are different types of Pfandbriefe, depending on the type of cover pool.
Pfandbriefe are used to fund loans that are in turn collateralised by:
- mortgage loans (Mortgage Pfandbriefe),
- public-sector loans (Public Pfandbriefe),
- ship mortgages (Ship Pfandbriefe) or
- aircraft mortgages (Aircraft Pfandbriefe).
The distinction between these Pfandbrief types thus relates to their respective cover pool.
Assets eligible as cover for Mortgage Pfandbriefe include mortgage loans in the Member States of the European Union, in contracting parties to the Agreement on the European Economic Area (EEA), or in Switzerland, the U.S., Canada, Japan, Australia, New Zealand, or Singapore. In addition to real estate loans, further cover assets are also permissible up to a maximum amount of 20% of the total volume of the Mortgage Pfandbriefe outstanding, including claims under bonds issued by or guaranteed by central governments or public-sector entities (see also “Public Pfandbriefe”) and money claims against suitable credit institutions.
Finally, claims under derivative transactions concluded with suitable credit institutions may be included in the cover up to a maximum of 12% (based on their net present value).
The eligibility of claims as cover for Mortgage Pfandbriefe is addressed in §§ 12-16 PfandBG.
In particular, claims against central governments and public-sector entities in EU and EEA countries may be used as cover assets for Public Pfandbriefe. In the case of claims against the U.S., Japan, Switzerland, and Canada, as well as their public-sector entities, they are eligible as cover only if the public debtor is allocated to credit quality step 1 pursuant to Directive 2015/575/EC. Eligible as further cover assets are money claims against suitable credit institutions and claims under derivative transactions (net present value), which may constitute up to 10% and 12% respectively of the total volume of Public Pfandbriefe outstanding.
The key statutory rules are found in § 20 PfandBG.
Loan claims secured by ship mortgages may be used as cover for Ship Pfandbriefe. In contrast to real estate loans, ship loans are generally limited to a term of 20 years. Eligible as further cover assets are likewise claims under bonds issued by or guaranteed by central governments or public-sector entities, money claims against suitable credit institutions, and claims under derivative transactions.
§§ 21 to 26 PfandBG form the statutory basis for eligibility as cover.
Claims secured by registered liens in accordance with § 1 of the German Act on Rights in Aircraft (Gesetz über Rechte an Luftfahrzeugen, LuftFzRG) or by foreign aircraft mortgages may be used as cover for Aircraft Pfandbriefe. The loan term is limited to 20 years. For Aircraft Pfandbriefe too claims under bonds issued by or guaranteed by central governments or public-sector entities, money claims against suitable credit institutions, and claims under derivative transactions are eligible as further cover assets.
§§ 26a to 26f PfandBG, which are modelled on the sections dealing with Ship Pfandbriefe, form the statutory basis for eligibility as cover.