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Julia Jordan

Julia Jordan

Head of Communications and Marketing

DZ HYP publishes German Pfandbrief Market Report 2020/2021


Pfandbriefe: A resilient market – European harmonisation efforts are processing

  • Pfandbrief spreads remain stable despite corona crisis, retained own  new issues are increasingly used by banks as collateral for the ECB
  • Pfandbrief banks agree on minimum standards for Green Pfandbriefe
  • Covid-19 weighs on pfandbriefe whose ratings could, however, survive a prolonged crisis due to the statutory protection mechanisms

When looking at risk premiums, we note that the COVID-19 pandemic has not taken too much of a toll on the German Pfandbrief market so far. Swap spreads were only marginally higher at the mid-year point than at the beginning of the year. At the same time, the pandemic has triggered an economic crisis that is having a negative impact on public-sector budgets and private households, and – as a consequence – on the credit quality of Mortgage and Public-sector Pfandbriefe.

Looking beyond COVID-19, green Pfandbriefe have been leading the way. The member institutions of the German Association of German Pfandbrief Banks (“vdp”) have prepared minimum standards for issuing these mortgage Pfandbriefe to account for the EU taxonomy for sustainable activities. 

The European influence on German Pfandbriefe continues to grow. In early 2020, the harmonisation package for EU covered bonds entered into force. Covered bonds meeting certain criteria may now use the labels “European Covered Bonds” or “European Covered Bonds (Premium)”. The corresponding directive is currently being implemented in the member states. As many of the provisions contained in the package seem to have been inspired by German Pfandbrief law, it seems likely that any adjustments required for the German market will be negligible.