Brexit: Pfandbrief banks welcome law amendment to safeguard Pfandbrief business in United Kingdom after the UK’s departure from the EU

  • Bundesrat adopts Tax Act relating to Brexit, thereby ensuring the eligibility of assets in the UK as cover assets
  • Amendments to the Pfandbrief Act provide for grandfathering and new lending in respect of cover assets located in the UK; Great Britain and Northern Ireland included in the Act as third countries

The Bundesrat today adopted the Tax Act relating to Brexit. Amongst others, this Act contains amendments to the Pfandbrief Act which safeguard the seamless continued eligibility of British assets as cover for Pfandbriefe after the UK leaves the EU (“Brexit”). The Act is formulated in such a way that even if the Brexit date is postponed, the grandfathering of all cover assets located in the UK will apply. The inclusion of the United Kingdom of Great Britain and Northern Ireland in the Pfandbrief Act as third countries also means that new lending business there will be regulated by the same provisions as for third countries such as Switzerland, the USA, Canada and Japan.

“The German Pfandbrief banks welcome this forward-looking measure by German legislators. The Tax Act relating to Brexit ensures the continued eligibility of UK assets as Pfandbrief cover assets in the future,” commented Jens Tolckmitt, Chief Executive Officer of the Association of German Pfandbrief Banks (vdp).  


Earlier drafts of the Tax Act relating to Brexit already envisaged grandfathering for mortgages in the United Kingdom that are included in cover on the Brexit date. The provisions governing new lending business were originally to have been implemented in the Act on the Further Implementation of the EU Prospectus Regulation, which will not be put to the vote until early this summer. This would have meant that new mortgages in the United Kingdom could not be included in cover between the Brexit date and the entry into effect of this law.

Today’s adoption of the Tax Act relating to Brexit means that the following specific amendments have been made to the Pfandbrief Act:

  • Inclusion of the United Kingdom of Great Britain and Northern Ireland in the cover requirements with regard to statutory overcollateralization (§§ 4, 13 and 20 Pfandbrief Act)
  • Safeguarding of the protection under grandfathering rules of cover assets in the countries mentioned insofar as such protection is not covered by the first point (§ 49)
  • Provision to the effect that assets included in cover up until the Brexit date are not to be applied against the 10% threshold for cover assets outside of the European Union in the case of which the safeguarding of the preferential right in insolvency has not been clarified (§ 49)
  • Stipulation of the scope of the legislation, i.e. the provisions will apply as soon as the United Kingdom has withdrawn from the EU, irrespective of when Brexit actually occurs.