Original scientific paper
The German model of re-financing mortgage loans by issuing covered bonds
Tatjana Josipović
Abstract
Since 19 July 2006, a new Pfandbriefgesetz has been in force in Germany regulating the issuing of cover bonds with security in mortgage claims, claims from loans to public legal bodies and claims insured by lien on ships. Re-financing of loans by issuing covered bonds (Pfandbriefe) has become an increasingly frequent model of re-financing loans on the European market. The German market is one of the strongest markets in covered bonds in Europe. The German model of re-financing mortgage loans by issuing covered bonds (Pfandbriefe) has proved to be highly successful in practice both for the banks issuing covered bonds and for investors in covered bonds. By activating the value of their mortgage claims banks can get new funds to offer new loans. On the other hand, investors are enabled to get additional profit with minimum risk of loss or inability to claim payment for invested funds in covered bonds. The exceptionally safe position of investors in covered bonds results from detailed legal regulations on issuing covered bonds regulating the conditions under which banks can issue covered bonds, mechanisms for special supervision of bank transactions and their transparency, the system of security and methods to safeguard their value, especially the privileged position of investors in covered bonds in the case of bank bankruptcy and the possibility to continue the regular payment of covered bonds obligations in spite of the bank bankruptcy.
Keywords
Pfandbrief; covered bonds; refinancing of mortgage loans; bonds; bankruptcy; security; protection of creditors
Hrčak ID:
6435
URI
Publication date:
5.12.2006.
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