Pfandbrief

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Pfandbrief for 2000 marks from the Bayerische Hypotheken- und Wechsel-Bank from January 1, 1901

A Pfandbrief is a bond issued by a Pfandbrief bank or mortgage bank with a type of collateral prescribed by law.

General

The compound is made up of "pledge" and "letter". Pfand probably goes back to the old French paner (“take away”) and appeared in Old High German as “pfant”. When deposit it was the right of the lender , one as collateral pledged thing use to be allowed, if the borrower was unable to loan to repay . The letter was in the Middle Ages often economical document and value guarantee, which is why the commercial correspondence primarily trade and capital interests served. In addition to business letters and commercial letters, the value letter, which is nowadays reminiscent of the Pfandbrief, Rentenbrief ( bond of a Rentenbank covered by pension debt ), promissory note or bill of exchange , has established itself .

history

With Pfandbriefe (Middle High German: "Pfantbrief") wealthy people or cities in the Middle Ages could pledge their assets or income in whole or in part as collateral in order to obtain credit . The document issued about this pledge was called the Pfandbrief. With such a Pfandbrief in 1378, the city ​​of Ulm pledged its income from city gate tariffs of 1,800 guilders to a Jewish moneylender. In addition to the pledging of income, assets were also loaned. In Austria, for example, the dukes Albrecht and Leopold pledged their Hainburg Castle to Johann von Lichtenstein in 1379, for which a Pfandbrief was issued in November 1388. On December 10, 1421, Emperor Sigismund gave the Austrian Duke Albrecht a mortgage bond on Budweis . At that time, the debtor was the issuer of a Pfandbrief , who signed it and handed it over to its creditor . In return , he paid out the loan secured by Pfandbrief. By repaying the loan, the creditor was able to trigger the Pfandbrief again (triggering), i.e. to demand it back. Pfandbriefe could already be transferred to other creditors by means of an order clause .

The Prussian mortgage and bankruptcy code of April 14, 1722 regulated the mortgage system for the first time. It stipulated that a complete land register and mortgage book should be set up at every court dealing with the mortgage system, which should contain all properties in the district with precise names and numbers. The name of the owner, the purchase title and the purchase price had to be attached to each property. In April 1748, the system of classification of creditors, taking into account the reason for debt, was eliminated and replaced by a pure priority principle based on the date of entry. It was now essential that the mortgagee should be entered first.

A “Cabinet Ordre” by Frederick the Great on August 29, 1769 regulated the issue of Pfandbriefe for the first time. With the creation of the landscapes - compulsory unions of the aristocratic landowners of a certain region under public law - agricultural credit for manor owners began in Prussia in the 18th century . Their creditors were the landscapes, which refinanced themselves by issuing "scenic Pfandbriefe". These Pfandbriefe were usually handed over to the borrower, who himself had to find a creditor to whom he could hand over the Pfandbriefe for cash . In June 1770, King Friedrich II was the first to recognize the Silesian landscape . It was a credit institution with the help of which the manor owners could issue mortgage bonds with interest at 5%. With the spread of the landscapes, the issuance of the Pfandbriefe was concentrated on the lenders, who in turn issued Pfandbriefe to refinance their lending business .

Gradually, banks were established that deal wholly or predominantly with the Pfandbrief business. The Allgemeine Deutsche Credit-Anstalt in Leipzig, founded in March 1856, assumed the function of a mixed mortgage bank in 1858, followed by Hypothekenbank Frankfurt in December 1862 . When Bayerische Hypotheken- und Wechselbank received the right to issue Pfandbriefe in 1864, the institute, which had already been founded in 1835, became a mixed mortgage bank. From 1862 on, around thirty mortgage banks had been founded in Germany within a short time. They granted mortgage loans to the landowner and refinanced themselves by issuing Pfandbriefe. The business activity of only a few of these banks was limited to the mentioned sectors; rather, their statutes permitted further, in some cases all types of banking business. The Pfandbrief has been able to be lombarded since 1891 , which means that the Pfandbrief itself has developed into a loan object for its owner .

Since January 1900, the Pfandbrief system has been based on the Mortgage Bank Act, which comprehensively regulated the issue and content of Pfandbriefe. It introduced the special banking system , according to which mortgage banks had to deal exclusively with the mortgage lending of real estate and the refinancing through Pfandbriefe; they were not allowed to do any other banking . In December 1927, the supplementary Public Pfandbrief Act came into force, which secured the privilege of satisfaction of Pfandbrief creditors; in April 1943, the Schiffsbank Act regulated this special branch of mortgage loans.

The Pfandbrief Act (PfandBG) , which has been in force since July 2005, summarizes these special provisions . It no longer favored the special banking principle, but enables all credit institutions to issue Pfandbriefe if they meet the legal requirements. In addition, the PfandBG introduced a name change to Pfandbrief banks, while the previous mortgage banks were allowed to keep their name and their banking license according to Section 43 PfandBG in conjunction with Section 32 KWG continues, as does the continued validity of the transactions according to Section 50 (2) PfandBG. The Association of German Pfandbrief Banks e. V. (vdp) was called the Association of German Mortgage Banks until 2005 and today represents 41 member institutions. In August 2005, SEB AG was the first commercial bank to receive a license from BaFin to issue Pfandbriefe and then merged its previous mortgage bank with the parent institute.

Since 1990, German Pfandbriefe have served as a model throughout Europe for changing national legal systems in order to establish similar financing instruments abroad.

species

There are mortgage, ship, aircraft and public Pfandbriefe. They are used to refinance mortgage- secured mortgage loans (mortgage bonds), ship mortgages (Mortgage Pfandbriefe), aircraft mortgages (Aircraft Pfandbriefe) or municipal loans (Public Pfandbriefe). The distinction between these types of Pfandbrief relates to the cover pool of the respective type of Pfandbrief. If a Pfandbrief bank issues at least 2 types of Pfandbrief, the cover pools must be separated from one another. Jumbo Pfandbriefe have been around since May 1995; they must have a minimum issue volume of EUR 1 billion. Pfandbriefe can be issued as bearer , order or registered bonds . These types affect the fungibility of Pfandbriefe, whereby the share of registered Pfandbriefe is now 47% of all Pfandbriefe (April 2013).

Legal issues

Pfandbriefe are bonds that, in accordance with their terms and conditions, represent direct, unconditional and unsubordinated liabilities of the issuer . According to Section 1 Paragraph 1 Clause 2 No. 1–4 PfandBG, the designation as Pfandbrief, mortgage, ship or aircraft Pfandbrief is mandatory and protected. Pfandbriefe may only be issued by credit institutions that operate the Pfandbrief business in accordance with Section 1 Paragraph 1 Clause 2 No. 1a KWG (“Pfandbrief banks”). This was expressly made clear by the legislature in the KWG.

In addition to the KWG, the PfandBG also applies to Pfandbrief banks. According to Section 1 (1) of the PfandBG, the Pfandbrief business consists of the

  • Issue covered bonds due to acquired mortgage ( § 14 para. 1 Pfandbrief Act) under the name of mortgage bonds or mortgage bonds ( english mortgage covered bonds )
  • Issue covered bonds due acquired claims against government agencies under the name of municipal bonds / municipal bonds or public Pfandbriefe ( English public sector covered bonds )
  • Issue covered bonds purchased due to ship mortgages ( § 22 para. 2 Pfandbrief Act) under the name Ship Pfandbriefe ( English ship mortgage covered bonds )
  • Issue covered bonds due acquired registered liens under § 1 of the Act Governing Rights in Aircraft or foreign aircraft mortgages ( § 26b para. 2 Pfandbrief Act) under the name Aircraft Pfandbriefe ( English airplane mortgage covered bonds ).

According to Section 41 PfandBG, Pfandbriefe enjoy designation protection.

Congruent coverage

The issued Pfandbriefe serve to refinance the lending business (legally referred to as " cover assets "), which according to Section 4 (1) PfandBG must exceed the volume of the Pfandbriefe in circulation by 2% ("securing excess cover"). A Pfandbrief is considered to be in circulation when it has been issued by the trustee and handed over to the Pfandbrief bank ( Section 8 (3) of the PfandBG). Real estate / ships / airplanes come into question as cover assets , which, in accordance with Section 14 of the PfandBG , can be mortgaged with a lending limit of a maximum of 60% of the lending value . The registered cover assets must reach at least 102% of the Pfandbriefe in circulation. The surplus cover may only exist in bonds of certain countries , their regions and institutions or bank balances with central banks of the European Union .

According to Section 5 of the PfandBG, the Pfandbrief bank must keep a cover register in which the cover assets including derivative claims are to be entered. It is to be monitored by a trustee appointed by BaFin ( § 8 PfandBG). Coverage values are liens ( mortgages , land charges and land charges according to § 18 , para. 1 PfandBG) on residential or commercial property , demands against government agencies ( municipal ), ship and aircraft mortgage loans. According to Section 22a of the KWG, this cover register is what is known as the refinancing register, in which the loan collateral must be entered ( Section 22d (2) of the KWG). Property liens entered in the refinancing register are, from the perspective of the Pfandbrief creditor, entitled to segregation under Section 47 InsO ( Section 22j (1) KWG and Section 30 PfandBG). If the registered Pfandbrief bank becomes insolvent , the Pfandbrief creditors can use the Pfandbrief cover outside of the insolvency proceedings .

Accounting

The bank accounting provides for the issuing Pfandbrief bank to report Pfandbriefe separately from other liabilities. According to § 22 RechKredV placed Pfandbriefe in the Pfandbrief Bank as "securitized liabilities" in traffic to passivate when it is bearer and order Pfandbriefe (§ 22 para. 1 RechKredV). Registered Pfandbriefe are to be shown under liabilities to banks or customers in accordance with Section 21 (1) and (2) RechKredV.

safety

The Pfandbriefe based on the PfandBG are exclusively covered Pfandbriefe because the Pfandbrief creditors have corresponding cover assets available as a liability pool . Uncovered Pfandbriefe, on the other hand, do not have any cover pool; here the Pfandbrief creditor is solely dependent on the creditworthiness of the issuer (this includes government bonds such as Bunds or municipal bonds ) - in practice, the word Pfandbrief always means covered Pfandbriefe. Mortgage buyer usually keep the mortgage bonds until their maturity in the securities account - so they follow the " buy and hold " strategy called. Pfandbriefe are under § 1807 . Para 1 no. 4 BGB to the ward money , are so absolutely safe and as cover capable. Unlike asset-backed securities ( English asset-backed securities , ABS) the issuing bank is liable in addition to its assets. This double liability avoids false incentives that can arise with ABS and are considered to be a contributory cause of the subprime crisis . The last insolvency of a Pfandbrief bank dates back to 1901. From an investor's point of view, no Pfandbrief has yet defaulted.

Pfandbriefe have a higher yield than Bunds with comparable features. This yield difference (“Jumbo Bund Spread”) is surprising at first glance, as the probability of default of the Pfandbrief is roughly the same as that of a Bund . However, the comparison of the failure probabilities has a high subjective component due to the lack of historical failure series; While the public sector is the issuer for Bunds, Pfandbrief issuers come from the banking sector. In addition, the yield difference does not only measure how the capital market assesses the probability of default. Rather, company and bond-specific risks as well as market risks also play a role. The liquidity of the Pfandbrief and tax differences compared to Bunds also have an impact.

As with all issues, rating agencies differentiate between the issuer rating (of the Pfandbrief bank) and the issue rating (of the Pfandbrief itself) for Pfandbriefe. Due to the covered nature of a Pfandbrief, the rating of the Pfandbrief is regularly at least as good, usually even better than the rating of the Pfandbrief bank. However, the rating agencies consider the statutory protection of the Pfandbrief alone to be insufficient to generally equate Pfandbriefe with the creditworthiness of Bunds.

Risks

With Pfandbriefe, there are four major risks for investors , which can also occur cumulatively.

  • Credit risk : It occurs when the obligor interest payment or repayment can not provide all or part of. This creditor risk is lower for covered bonds such as Pfandbriefe and municipal bonds , but not completely eliminated.
  • Interest rate risk : This risk arises for the investor if the current interest rate level exceeds the return (also approximately: the nominal interest rate ) during the term of the bond.
  • Exchange rate risk : This arises for investors who consider the bond currency to be a foreign currency if the exchange rate falls below the original acquisition rate during the term of the bond.
  • Inflation risk: This risk occurs if inflation is higher than expected during the term of the bond. It's the uncertainty about the real size of future payouts. It is to be assessed separately from the interest rate risk, because the Fisher effect can only be empirically proven in the long term. This risk is eliminated with inflation-linked bonds .

These risks lead to the classification of a bond in a certain risk class .

meaning

For German mortgage and Pfandbrief banks, Pfandbriefe represent the most important refinancing instrument with 70% of total assets . In terms of the volume in circulation, the market for German Pfandbriefe is the largest segment within the global covered bond market with a share of 16% in December 2014, followed by Denmark (with a market share of 15%), France (13%), Spain (12%) and Sweden (8%). Together, these five market segments represent 65% of the total circulation volume. A number of market participants in the European covered bond market have joined forces in the European Covered Bond Council .

Association of German Pfandbrief Banks

The German Pfandbrief banks have come together to form the Association of German Pfandbrief Banks (vdp). The Association of German Pfandbrief Banks currently represents more than 40 institutes.

Individual evidence

  1. ^ Werner Faulstich: Media and publics in the Middle Ages: 800-1400. 1996, p. 265.
  2. ^ Georg Steinhausen: History of the German letter. 1889, p. 70 ff.
  3. Carl Friedrich Jäger: Ulm's constitution, civil and commercial life in the Middle Ages , 1831, p. 370.
  4. ^ Franz Xavier Joseph Schweickhardt (Knight of Sickingen): Representation of the Archduchy of Austria under the Ens. Volume 2, 1834, p. 144.
  5. ^ Leopold-Michael Marzi: The law of the Pfandbriefe and mortgage banks in the past and present. 2002, p. 7.
  6. ^ Association for the history of the Mark Brandenburg: Research on Brandenburg and Prussian history. Volume 46, 1934, p. 38.
  7. ^ Leopold-Michael Marzi: The law of the Pfandbriefe and mortgage banks in the past and present. 2002, p. 8.
  8. ^ Günther Schulz: Social and Economic History. 2005, p. 149.
  9. ^ Willi A. Boelcke: The agricultural credit in German territorial states from the Middle Ages to the beginning of the 18th century. In: Michael North (ed.): Credit in late medieval and early modern Europe. 1991, pp. 193-213.
  10. ^ Leopold-Michael Marzi: The law of the Pfandbriefe and mortgage banks in the past and present. 2002, p. 20.
  11. ^ Anton Pavlicek: The Pfandbrief Law. 1895, p. 21 f.
  12. Renzo G. Avesani, Antonio Garcia Pascual, Elina Ribakova: The Use of Mortgage Covered Bonds. 2007, p. 9.
  13. Tobias Koppmann: Covered bonds in Germany and Great Britain. 2009, p. 142.
  14. BT-Drucksache 15/4321 of November 29, 2004, draft law for the reorganization of Pfandbrief law. P. 21.
  15. ^ Daniel Mohr: Pfandbriefe as an alternative to federal bonds. In: Frankfurter Allgemeine. November 4, 2011, accessed September 18, 2017 .
  16. ^ Robert Sünderhauf: Assessment of the default risk of German mortgage bank Pfandbriefe. 2006, p. 6 f.
  17. ^ DG HYP: The German Pfandbrief Market 2015/2016. September 2015, p. 6.

literature

  • Louis Hagen: Pfandbriefe . In: Mathias Habersack, Peter O. Mülbert, Michael Schlitt (eds.): Corporate financing on the capital market . 2nd Edition. Dr. Otto Schmidt, Cologne 2008, ISBN 978-3-504-40094-1 .
  • Otmar Stöcker: Basics of Pfandbrief Law . In: Herbert Schimansky, Hermann-Josef Bunte, Hans-Jürgen Lwowski (eds.): Banking Law Handbook . CH Beck, Munich 2007, ISBN 978-3-406-54293-0 .

Web links

Wiktionary: Pfandbrief  - explanations of meanings, word origins, synonyms, translations