The Pfandbrief 2011 | 2012

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The Methodologies of the Rating Agencies Standard & Poor’s Rating Services rates covered bonds based on its criteria published in late 2009. S&P’s criteria reflect its belief that covered bonds that exhibit mismatches between the underlying assets and the covered bond liabilities should be linked to the issuer credit rating. Only if a covered bond can be isolated from that risk can S&P rate the covered bonds on a de-linked basis from the issuer. When a program is exposed to asset-liability mismatch (ALMM) risk, the maximum potential rating uplift the covered bond rating can achieve above the issuer credit rating is seven nothes. Therefore, ‘AAA’ ratings can only be assigned to covered bonds of highly rated issuers, provided that S&P believes the program has sufficient credit enhancement to cover all relevant risks. Asset analysis The underlying cover pools typically contain residential mortgage loans, public sector bonds and loans, or some other form of high credit-quality collateral. Thus, in case of a default a high rate of asset recovery can be expected. However, the cover pool assets may be exposed to payment interruptions and defaults. Therefore, using jurisdiction- and asset-specific assumptions, S&P analyses these pools to form a view on the expected stressed credit performance. S&P currently reviews the assumptions applied in the asset analysis of public sector covered bonds. 162 Cash-Flow and Market Value Analysis In addition to interest and exchange rate mismatches there is an inherent maturity mismatch between the cover pool assets and the covered bonds. Analysing the degree of this mismatch together with the potential repayment options is an important step in S&P’s cash-flow- and market value analysis for covered bonds. If the cover pool fails to generate sufficient cash-flows, S&P models the sale of the remaining cover pool assets by discounting their cash flows using a stressed discount rate and an asset specific liquidity premium. We also evaluate the alternatives at the trustee’s disposal to manage ALMM in case of an issuer default. The broader the range of funding options and the more well-established and systemically important S&P believes the covered bond market is the higher is the potential rating uplift the covered bond rating can achieve above the issuer credit rating. Lastly, S&P determines a rating on the program that reflects the cover pool’s actual level of credit enhancement. In this step, S&P assesses whether the available credit enhancement in a program is equal to or higher than the target credit enhancement deemed commensurate to support the maximum potential rating. The target credit enhancement covers all risks that S&P considers relevant and in our view allows for timely payment of all covered bond liabilities. S&P publishes the main indicators of the covered bonds it rates in a quarterly report (see “Global Covered Bond Characteristics and Rating Summary” on www.standardandpoors.com/coveredbonds). Legal Risk S&P typically reviews the following legal aspects when assigning a rating to a covered bond program – with special regard to the case if the issuing bank fails: — Is there a clear segregation of the assets and cash flows; — Does no acceleration of payments to noteholders of the program occur; — Are covered bonds excluded from the payment moratorium or forced restructuring of the bank; — Is the provided credit enhancement fully available to covered bond holders; — Are hedging instruments still available after the insolvency of the bank; — What options has the trustee available to access liquidity; and — What options are available to manage the cover pool. Operational and Administrative Risks In its rating process S&P also considers the relevant operational and administrative risks. Hereby, we review the organisational aspects of the bank, as well as the credit life cycle of the respective assets. The issuer’s business policy, origination and servicing operations, together with recovery following a default are all assessed. Counterparty Risks To the extent a program benefits from the use of derivatives to address any interest rate or currency mismatches S&P reviews the underlying agreements to assess whether they conform with its relevant counterparty criteria. The covered bond specific counterparty criteria are currently under review. S&P methodology may change from time to time as a result of market and economic conditions that would affect our credit judgment. S&P currently reviews its counterparty criteria for covered bonds. (Editor‘s Note: This article is a summary of the S&P criteria published in late 2009 (“Revised Methodology And Assumptions For Assessing Asset-Liability Mismatch Risk In Covered Bonds” published on Dec. 16, 2009 and available on RatingsDirect and www.standardandpoors.com/coveredbonds.) Contacts: Primary Credit Analyst: Sabrina Miehs, Frankfurt, (49) 69-33-999-304; sabrina_miehs@standardandpoors.com Analytical Manager - Covered Bonds: Karlo Fuchs, Frankfurt, (49) 69-33-999-156; karlo_fuchs@standardandpoors.com
Topics covered in 1996 – 2010 1996 — The Pfandbrief market, legal framework and issuers | FRANZ-JOSEF ARNDT — The international credit investor’s view of Pfandbriefe | GEORG GRODZKI — The Jumbo Pfandbrief market | FRIEDRICH MUNSBERG — Liquidity on the Pfandbrief market | KARL-HEINZ PRIESTER — Yields and spreads on the German market | DR. ALFRED BÜHLER, DR. MICHAEL HIES — The German Pfandbrief Price Index PEX and the Pfandbrief Performance Index PEXP | DR. ALFRED BÜHLER, DR. MICHAEL HIES — Mortgage Pfandbriefe and mortgage-backed securities | FRIEDRICH MUNSBERG 1997 — The Pfandbrief market, legal framework and issuers | FRANZ-JOSEF ARNDT — The Jumbo Pfandbrief market | FRIEDRICH MUNSBERG — Rating German Pfandbriefe: Overcollateralization for a Triple A | GAIL I. HESSOL, DR. JÜRGEN U. HAFERKORN, MICHAEL ZLOTNIK — Indices for the Jumbo Pfandbrief market: JEX and JEXP | JOSEF DEUTSCH, JÜRGEN HILLER — Yields and spreads on the German market | DR. ALFRED BÜHLER, DR. MICHAEL HIES — The German Pfandbrief Price Index PEX and the Performance Index PEXP | DR. ALFRED BÜHLER, DR. MICHAEL HIES — Mortgage Pfandbriefe and mortgage-backed securities | FRIEDRICH MUNSBERG — A European standard for the Pfandbrief | DR. DIETER BELLINGER 1998 — The German Pfandbrief | FRANZ-JOSEF ARNDT — The Jumbo Pfandbrief market | FRIEDRICH MUNSBERG — The Jumbo Pfandbrief future | JOSEF DEUTSCH, RALF DREYER — The Pfandbrief under European Monetary Union | GERHARD BRUCKERMANN — A European standard for the Pfandbrief | DR. DIETER BELLINGER — Pfandbrief rating in EMU | DR. Oliver EVERLING — Yields and spreads on the German capital market | DR. ALFRED BÜHLER, DR. MICHAEL HIES — Indices for the German Pfandbrief market: PEX/PEXP and JEX/JEXP | DR. ALFRED BÜHLER, JOSEF DEUTSCH, JÜRGEN HILLER, DR. MICHAEL HIES 163 1999 — The Pfandbrief | FRANZ-JOSEF ARNDT — The mortgage banks in Europe | KURT BONFIG — State supervision of the German mortgage banks | VOLKHER KERL — Relative value aspects in the Jumbo market | DR. ERWIN MIRKES — Pfandbrief’s prospects as a spread product benchmark under the euro | DR. RALF GROSSMANN, HANSJÖRG PATZSCHKE — Structured Pfandbriefe as an attractive alternative investment | MARTIN SCHULTE — The Pfandbrief and European bond market indices | ANNETTE SCHNEEWEIS 2000 — The Pfandbrief | FRANZ-JOSEF ARNDT, JENS TOLCKMITT — Alternative funding possibilities for mortgage banks | FRANK DAMEROW — The Pfandbrief and related debt instruments | GEORG GRODZKI — The world of bonds goes electronic | HORST BERTRAM — The Jumbo repo market | MARCO HOSENSEIDL, TED PACKMOHR — Jumbo Pfandbrief – relative value analysis | DR. UDO HERGES — State supervision of the German mortgage banks | VOLKHER KERL — Valuing properties for property finance purposes | REINER LUX
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The Pfandbrief 2011 | 2012 Facts an
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The Association of German Pfandbrie
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Member Institutions of vdp 84 Aarea
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Jan Bettink | president framework i
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Pfandbriefe are covered interest-be
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the special supervision of Pfandbri
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Claims against Public-Sector Entiti
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are not eligible as cover. These re
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and to meet liquidity management co
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Ring-Fencing of the Cover Pools The
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all. Instead, they are part of the
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In changeable times, investors look
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Monthly sales of new issues in 2010
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Pfandbrief-Bund-Spreads in % 200 18
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vdp Initiative for the Improvement
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As a reaction to the problems and r
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The The significance of common equi
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waiving exemption from retroactive
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For banks specialising in public se
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Solvency II is intended to reform t
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Spread and counterparty risk The eq
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Counterparty default risk Mortgage
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liabilities and which plan to optim
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“Benchmarks” are reference or c
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account of its macro strategy, has
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iBoxx COVERED BOND INDICES (JUNE 20
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EuroMTS Index The EuroMTS Covered B
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eb.rexx INDEX FAMILY eb.rexx Overal
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The question of the ETF’s replica
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Cover Ausgehend assets von from ein
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Michael Schulz, NordLB; Bodo Winkle
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BW: The German mortgage lending val
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What, in your opinion, will investo
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The fallout of the financial and ec
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cue fund, first and second economic
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Latest Developments on the Rental M
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Driven by such healthy fundamentals
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Residential Properties The German r
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It is time for new priorities in th
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explain the new assumptions and the
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tion in the industry outlook in one
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Reduce the Significance of External
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84 Aareal Bank | Wiesbaden 86 Bayer
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Aareal Bank AG Paulinenstrasse 15 6
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BayernLB Brienner Strasse 18 80333
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Berlin-Hannoversche Hypothekenbank
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Bremer Landesbank Kreditanstalt Old
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COREALCREDIT BANK AG Corealcredit H
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DekaBank Deutsche Girozentrale Main
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Deutsche Apotheker- und Ärztebank
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Deutsche Genossenschafts-Hypotheken
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Deutsche Hypothekenbank (Actien-Ges
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Deutsche Kreditbank AG Taubenstrass
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Deutsche Pfandbriefbank AG Freising
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Deutsche Postbank AG Friedrich-Eber
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Deutsche Schiffsbank AG Domshof 17,
Page 113 and 114: Dexia Kommunalbank Deutschland AG C
Page 115 and 116: Düsseldorfer Hypothekenbank AG Ber
Page 117 and 118: DVB Bank SE Platz der Republik 6 60
Page 119 and 120: Eurohypo Aktiengesellschaft Helfman
Page 121 and 122: Hamburger Sparkasse AG Adolphsplatz
Page 123 and 124: HSH Nordbank AG Gerhart-Hauptmann-P
Page 125 and 126: ING-DiBa AG Theodor-Heuss-Allee 106
Page 127 and 128: Kreissparkasse Köln Neumarkt 18 -
Page 129 and 130: Landesbank Baden-Württemberg Am Ha
Page 131 and 132: Landesbank Berlin AG Alexanderplatz
Page 133 and 134: Landesbank Hessen-Thüringen (Helab
Page 135 and 136: M.M.Warburg & CO Hypothekenbank AG
Page 137 and 138: Münchener Hypothekenbank eG Karl-S
Page 139 and 140: Nord/LB Norddeutsche Landesbank Gir
Page 141 and 142: SaarLB Landesbank Saar Ursulinenstr
Page 143 and 144: SEB AG Ulmenstrasse 30 60325 Frankf
Page 145 and 146: Sparkasse KölnBonn Hahnenstrasse 5
Page 147 and 148: UniCredit Bank AG (former Bayerisch
Page 149 and 150: VALOVIS BANK AG Theodor-Althoff-Str
Page 151 and 152: Westdeutsche ImmobilienBank AG Gros
Page 153 and 154: WestLB AG Herzogstrasse15 40217 Dü
Page 155 and 156: WL BANK AG Westfälische Landschaft
Page 157 and 158: Wüstenrot Bank AG Pfandbriefbank H
Page 159 and 160: IKB Deutsche Industriebank AG Wilhe
Page 161 and 162: Other Pfandbrief Issuers 2010 As at
Page 163: Moody’s rating for a covered bond
Page 167 and 168: 2006 — The Pfandbrief Market 2005
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Page 171: Head Office Brussels Office Liaison
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