Pfandbriefe in periods of financial crisis – Quality prevails

Ernst-Albrecht Brockhaus und Horst Bertram, BayernLB

“They are more valuable now than ever before”. Every treasurer with this product in their collection of refinancing instruments can endorse this assessment of German Pfandbriefe. German Pfandbriefe have performed impressively during the global financial market and banking crisis. The high quality standards demanded by law, the regulator and the issuing banks mean that demand from investors has never dried up. Even in the face of dramatic headlines in the media, Pfandbriefe were still in demand.

The product is therefore also important for the refinancing of a large commercial bank. The advantage of Pfandbriefe lies above all in relatively cheap refinancing conditions and the possibility of maintaining long-term capital market funds, even during tough times. Since the financial market crisis broke out in summer 2007, banks have generally received sufficient new unsecured funds from the capital markets. However, maturities are currently relatively short at between two and three years. Pfandbriefe offer the issuer the possibility of diversify-ing the investor base, maintaining relatively high volumes – often with a relatively short pre-paration time – and thus also of optimising asset/liability management.