EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 23 November 2012 
on covered bonds ( Pfandbriefe ) 
(CON/2012/92) 
 
Introduction and legal basis 
On 11 September 2012, the European Central Bank (E CB) received a request from the German Federal 
Ministry of Finance for an opinion on a draft law implementing Directive 2012/…/EU on access to the activity of credit institutions and the supervision of credit institutions and investment firms and adjusting 
supervision law to Regulation (EU)  No …/2012 on the supervisory re quirements for credit institutions 
and investment firms (hereinafter the ‘draft law’). 
The ECB’s competence to deliver an  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the sixth indent  of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Ce ntral Bank by national authorities regarding draft 
legislative provisions
1, as the draft law relates to rules applicable  to financial institutions insofar as they 
materially influence the stability of financial ins titutions and markets. In accordance with the first 
sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council 
has adopted this opinion. 
 1.  Purpose of the draft law 
The draft law is principally aimed at implementing th e draft directive on access to the activity of credit 
institutions and the supervision of credit institutions and investment fi rms and adjusting supervision law 
to Regulation (EU) No …/2012 on the supervisory re quirements for credit institutions and investment 
firms. 
The draft law also updates the Law on covered bonds ( Pfandbriefe ), in particular as regards the provisions 
on the appointment, remuneration and accountability of a special administrator of a bank dealing in covered bonds ( Pfandbrief bank) with limited business activities, who also caters for the due payments of 
Pfandbrief liabilities in accordance with the original ma turities and, to that purpose, manages the liquidity 
(hereinafter ‘cover pool administrator’). The draft law also addresses the relationship between the cover 
pool administrator and the insolvency administrato r in charge of restructuring or liquidating the non-
covered bond related  assets and liabilities. Furthermore, tr ansparency requirements are increased. 
Pursuant to the draft law, the comp etent court will in future be res ponsible for the appointment of the 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
ECB-PUBLIC  
2 cover pool administrator and will make use of the expe rtise of the Financial Supervisory Agency (BaFin) 
in selecting the cover pool administrator. The provisi ons relating to the accountability of the cover pool 
administrator are adapted to reflect that of the Boar d of Directors of a public limited company (section 93 
of the German Joint Stock Company Act); this ai ms to more appropriately mirror the cover pool 
administrator’s managerial responsibility in relation to  the continuation of the core business and to allow 
for an effective decision-making process in line w ith usual corporate governance requirements. The 
remuneration of the cover pool administrator and improved access to information by the cover pool 
administrator are also provided for. 
With regard to potential insolvency  proceedings in respect of the Pfandbrief bank with limited business 
activities, self-administration is promoted as a further instrument of preserving the Pfandbrief bank’s 
operational integrity to the greatest extent possible. 
Sentences 1 and 2 of Article 30(4) of the Law on c overed bonds preclude the insolvency administrator 
from invoking a right of appeal under the Insolvency Code in order to challenge acts of the cover pool administrator. This aims to strengthen th e confidence of commercial partners in the Pfandbrief bank with 
limited business activities. The inso lvency administrator of the Pfandbrief bank must accept any 
consequences arising from a cover pool administrato r’s conduct in good faith, even if it has had a 
negative impact on the non-covered bond related insolvency estate. 
Whereas Article 28 of the Law on covered bonds already provides for the publication of detailed 
information on the quality of cover assets, the draft law aims at increasing transparency on interest-rate 
and currency risks. In addition, information on th e maturity breakdown of ou tstanding covered bonds is 
further enhanced in relation to residual maturities be low two years. Moreover, information on the country 
of the debtor/guarantor is to be provided for s ubstitute assets in the cover pool, which may comprise 
mainly marketable public sector debt, as well as av erage loan seasoning for lo ans in the cover pool. The 
breakdown in terms of size of the total debt claims in  the information on the cover pool will also change 
slightly, with the introduction of a new information category of EUR 0.3 million to EUR 1 million. Finally, the share of cover assets eligible for Eurosystem monetary policy refinancing will also be published. 
Article 12(3) of the Treaty establishing the Europe an Stability Mechanism pr ovides for the increasing 
introduction of collective action clauses. The co rresponding provision in the Law on covered bonds 
clarifies in accordance with present practice the fact that bonds of St ate debtors with collective action 
clauses may be included in the cover pool. 
 2. General observations As pointed out in the ECB’s opinion on an am endment to the Law on covered bonds in 2010
2, the Law on 
covered bonds provides for an ailing Pfandbrief bank to retain its status as a fully licensed institution as 
concerns the Pfandbrief bank with limited business activities. This enables the Pfandbrief bank to 
continue to operate the cover pool, with the pur pose of making appropriate separate settlements of 
                                                 
2  Opinion CON/2010/47. 
ECB-PUBLIC  
3 covered bonds outside the scope of insolvency provis ions and of ensuring the complete settlement of 
outstanding covered bonds. In this context, the ECB welcomes the draft law as it further clarifies the 
conditions for the cover pool ad ministrator and thus strengthens the ongoing operability of the Pfandbrief  
bank with limited business activities. 
 3. Information disclosure As regards the disclosure of information, the ECB welcomes the amendments to Section 28 of the Law on 
covered bonds and considers that the dr aft law is a further step towards increasing overall transparency in 
the Union’s covered bond markets. In creased transparency enables invest ors to compare different covered 
bond programmes more easily, thus contributing to the long-term sustainable development of the covered 
bond market as the most important privately issued bond segment in Europe’s capital markets. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 23 November 2012. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI