Opinion of the European Central Bank of 23 November 2012 on covered bonds (Pfandbriefe) (CON/2012/92)
Date: 2012-11-23
Institutions: European Central Bank
Subjects: Germany, bond, credit institution, financial stability, financial supervision, national law

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 (ECB) 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  requirements  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  Central  Bank  by  national  authorities  regarding  draft 
legislative provisions1, as the draft law relates to rules applicable to financial institutions insofar as they 

materially  influence  the  stability  of  financial  institutions  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 the draft directive 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  requirements  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 maturities 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  administrator  in  charge  of  restructuring  or  liquidating  the  non-

covered  bond  related  assets  and  liabilities.  Furthermore,  transparency  requirements  are  increased. 

Pursuant  to  the  draft  law,  the  competent  court  will  in  future  be  responsible  for  the  appointment  of  the 

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OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                 
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cover pool administrator and will make use of the expertise of the Financial Supervisory Agency (BaFin) 

in selecting the cover pool administrator. The provisions relating to the accountability of the cover pool 

administrator are adapted to reflect that of the Board of Directors of a public limited company (section 93 

of  the  German  Joint  Stock  Company  Act);  this  aims  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  with  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 covered 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 the confidence of commercial partners in the Pfandbrief bank with 

limited  business  activities.  The  insolvency  administrator  of  the  Pfandbrief  bank  must  accept  any 

consequences  arising  from  a  cover  pool  administrator’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 the maturity breakdown of outstanding covered bonds is 

further enhanced in relation to residual maturities below two years. Moreover, information on the country 

of  the  debtor/guarantor  is  to  be  provided  for  substitute  assets  in  the  cover  pool,  which  may  comprise 

mainly marketable public sector debt, as well as average loan seasoning for loans 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  European  Stability  Mechanism  provides  for  the  increasing 

introduction  of  collective  action  clauses.  The  corresponding  provision  in  the  Law  on  covered  bonds 

clarifies  in  accordance  with  present  practice  the  fact  that  bonds  of  State  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 amendment to the Law on covered bonds in 20102, 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  purpose  of  making  appropriate  separate  settlements  of 

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Opinion CON/2010/47. 

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covered  bonds  outside  the  scope  of  insolvency  provisions  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 administrator 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 draft law is a further step towards increasing overall transparency in 

the Union’s covered bond markets. Increased transparency enables investors 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 

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