Pfandbriefe

Pfandbriefe are a type of covered bond issued by credit institutions under the German Pfandbriefe Act (see Pfandbriefgesetz). A special Pfandbrief business license is required for the issue of such bonds (the so-called "Pfandbriefe" banks).

Pfandbriefe can be secured by mortgage on real property (Mortgage Pfandbriefe) or loans to public authorities (Public Pfandbriefe, formerly known as Kommunalobligationen). It is also possible to issue bonds using the value of a ship (Schiffspfandbriefe) or an aircraft (refinance of aviation loans, Flugzeugpfandbriefe) as collateral.

As for the loan amount, the Jumbo Pfandbriefe segment is distinguished. This term refers to issues for at least EUR 1 billion.

Specific Features:

Pfandbriefe bonds have many regulatory privileges due to their high creditworthiness, for example, banks can use Jumbo-Pfandbriefe as collateral for Category II and traditional Pfandbriefe as collateral for Category III; are classified as Tier 1 or Tier 2A liquid assets in terms of liquidity coverage ratio (LCR), and give higher investment limits for funds meeting requirements of the UCITS Directive. Pfandbriefe bonds usually have a AAA rating, are highly reliable and transparently structured.