• Abstract and Figures
• Public Full-text

The Covered Bond Report www.coveredbondreport.com August 2019 The Pfandbrief Roundtable 2019 IN ASSOCIATION WITH THE VDP The Pfandbrief Roundtable 2019 The EU covered bond legislative package, sustainable finance developments, and a possible revival of APP were key topics in our annual Pfandbrief roundtable, produced in association with the vdp and hosted by pbb on 26 June, with leading players sharing their views ahead of the 250th anniversary of the Pfandbrief in August. Neil Day, The Covered Bond Report: are discussions about tightening the regu- Matthias Melms, NordLB: Indepen- What is it about the Pfandbrief that latory framework, it is important to ensure dently of the issuers and the assets that has resulted in it being such a long- that the Pfandbrief remains competitive are behind the Pfandbrief, when we talk lasting and successful product? versus other products. about 250 years of a success story we have to talk about the Pfandbrief law. A Jens Tolckmitt, Association of German Felix Rieger, Deutsche Bundesbank: foreign investor once told me: I want to Pfandbrief Banks (vdp): The stability I am here representing the Bundesbank as invest in Germany, in the German Pfand- and the high quality of the legal frame- an investor today — not for its role regard- brief, but I don’t care about the issuer, I work have been decisive in making the ing monetary policy — and in this respect, don’t care about the assets, I just want Pfandbrief such a long-lasting product. investing money on behalf of Federal gov- to have the Pfandbrief with the highest What is especially important today, is that ernment entities, the Bundesbank is a spread. I asked them what the strategy it has over time consistently combined the very conservative investor. And it’s really behind that was, and they said: I think spirit of tradition with the spirit of innova- the combination of the Pfandbrief being a the German Pfandbrief law is the best tion to keep the product relevant. When very low risk product but at the same time law in the world and I’m convinced that trying to develop the Pfandbrief into new offering a little bit more yield pick-up than there will never be a default of a German areas, we — meaning the Pfandbrief issu- a traditional government investment that Pfandbrief. This best demonstrates how ers — are mindful of the well-established is behind its success. But I think that after we have a special success story here in principles that make the product safe, but 250 years its reputation doesn’t really need the German Pfandbrief law, which per- at the same time are not bound by tradi- to be explained anymore. haps has the reputation of being the best tion. Look at the jumbo Pfandbrief. Look Looking at it from a broader perspec- covered bond law in the world. Indeed, at green Pfandbriefe. Over time, they tive, the Pfandbrief is also very important we have seen several jurisdictions simply have given it a new flavour and made the for the economy as a whole in its function copy the German Pfandbrief law, or at Pfandbrief fit for purpose. And this is how of facilitating real estate finance, where- least elements that were introduced, like we should continue. by illiquid mortgages are transferred to 180-day liquidity line. So the German Most important for issuers is that in the liquid bonds — liquid not only in the Pfandbrief law in particular is a success face of all the regulatory developments the market, but also in central bank mon- story, not just the Pfandbrief, per se. industry is confronted with, the Pfandbrief etary policy operations. Therefore covered must remain a product that is economically bonds are for us an asset class that we view Thomas Ludwig, Commerzbank: The viable for issuers to use. So whenever there very positively. Pfandbrief has been alive for 250 years 2 The Covered Bond Report August 2019 IN ASSOCIATION WITH THE VDP Roundtable participants (above, left to right): Matthias Melms, head of covered bond and SSA research, NordLB Neil Day, managing editor, The Covered Bond Report, and moderator Thomas Ludwig, director, bank origination, Commerzbank Felix Rieger, head of section management of euro portfolios, third-party portfolios, Götz Michl, head of funding and debt investor Deutsche Bundesbank relations, Deutsche Pfandbriefbank AG (pbb) Felix Zillmann, funding and investor relations, Jens Tolckmitt, chief executive, Association of Berlin Hyp German Pfandbrief Banks (vdp) now, but it has changed and has devel- changed. Other products are more familiar to other asset classes, you have an instru- oped. The way that issuers, lawyers and to retail investors — they invest in term de- ment that is relatively simple, clear and the market in general have combined to posits, maybe know about ETFs. Because transparent. Especially if you compare it keep the instrument up to date has been of the low interest rate environment, the with other kinds of securitisation, where key to keeping it in such a strong position. Pfandbrief meanwhile moved away from you sometimes have 500 pages of docu- Look at Helaba today issuing a suc- the broad investor base among retail inves- mentation. With the Pfandbrief you have cessful five year Pfandbrief with a nega- tors to now being more focused on banks, quite a small booklet, in fact, the Pfand- tive yield — only by having a very deep asset managers and professional investors. briefgesetz, and that’s basically all you investor base can you ensure such tight That development is typical of the long his- have to know. pricing, and the German Pfandbrief is still tory of the Pfandbrief, where we have seen the tightest product in the European cov- changing trends in the product. Day, The CBR: The European Com- ered bond world. That makes the issuer’s mission has finalised a new “book- life efficient, still having such a cheap in- Felix Zillmann, Berlin Hyp: We turned let” for European covered bonds in strument to refinance real estate as well 150 years old last year, and the Pfandbrief the form of the legislative package. as public sector lending. So yes, it’s a real has always been the most important refi- How satisfactory is the outcome? success story. nancing instrument for us ever since. A lot of things have changed over that time, Tolckmitt, vdp: There are two key takea- Götz Michl, Deutsche Pfandbrief- but the mortgage Pfandbrief and the busi- ways from the harmonisation package. bank (pbb): We grew up with the word ness case for it remain the same for Berlin Firstly, it is high quality, which is a very Pfandbrief. Thirty years ago, the Germans Hyp. This really proves the quality and the good development. This is a pre-requisite were familiar with Pfandbriefe and Kom- stability of the product. for safeguarding the preferential treat- munalobligationen (the old name for ment that all covered bonds enjoy and Öffentliche Pfandbriefe), even if they were Rieger, Bundesbank: What I have al- which is important for the success of the not working in banking. But times have ways found very nice is that compared product. Special preferential treatment is August 2019 The Covered Bond Report 3 IN ASSOCIATION WITH THE VDP reduce a little the transparency and level of harmonisation that was achieved. Melms, NordLB: The Pfandbrief was the seed of the covered bond market 250 years ago, but since then covered bonds have grown into a global product. At least with- in the EU — where most of the issuers and investors are based — it was therefore necessary to have harmonised regulation. And although we have a principles-based approach, there are some elements that will be aligned across all EU jurisdic- tions. And I have to say that investors — especially second and third tier Ger- man investors who invest in Pfandbriefe Matthias Melms, NordLB: ‘Unfortunately the European Commission missed and covered bonds more than anywhere an opportunity to write a regulation also for ESNs’ else — find it helpful to be able to rely on such minimum standards, if they don’t a key attraction to bank, insurance and And which assets will they be able to refi- have the capacity to analyse every covered fund investors, to name a few. nance? There are areas in which covered bond law and every cover pool. That is the Secondly, it is a principles-based direc- bond-like instruments or products using real value of the directive, to build trust in tive, so we maintain the ability to innovate covered bond techniques could be used, this product, at least in respect of the EU. and develop the Pfandbrief law further, but the extent to which it is permitted And I’m pretty convinced that jurisdic- which — as I said before — is one of the needs to be considered very carefully — in tions outside the EU will in future take the key elements in the success of the Pfand- Germany, but in other countries, too — so EU directive as a blueprint and try to be brief. Importantly, it also maintains the as not to hamper the quality perception of compliant with it, implementing some of competition, so to speak, between the dif- the overall product. the elements into their domestic covered ferent covered bond laws, so that people bond laws. can go in different directions, and every- Day, The CBR: Ensuring the privi- body can learn from the best. leged treatment by having mini- Michl, pbb: It is obvious that minimum You have to recall where we came mum standards was part of the standards will make it easier for a smaller from. We have discussed this issue for thinking behind the directive.

Load more

  12

Copy Link