Covered Bonds - DG Hyp
Covered Bonds - DG Hyp
Covered Bonds - DG Hyp
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<strong>DG</strong> HYP COVERED BONDS – PFANDBRIEFE – QUALITY THE PATH OUT OF THE CRISIS SPECIAL MAY 2009<br />
Special requirements for mortgage pfandbriefe<br />
The regulations now governing the ordinary cover assets for mortgage pfandbriefe are<br />
largely identical to the provisions of the HGB. Only mortgage loans that meet certain<br />
requirements are eligible as cover assets. Hence the mortgages must encumber properties,<br />
rights equivalent to real property or such rights under a foreign legal system that are<br />
comparable with the rights equivalent to real property under German law.<br />
A duty of insurance and an obligation to calculate lendable values also place additional<br />
requirements on mortgage loans. Only the long-term, sustainable net asset value and<br />
capitalised earnings of a property can be taken into consideration when determining its<br />
lendable value. According to the PfandBG, mortgage loans used as cover for mortgage<br />
pfandbriefe may not exceed 60% of the lendable value of a property. This limit applies<br />
regardless of whether the building is used for residential or commercial purposes. This<br />
regulation, which serves to protect pfandbrief creditors, is very strict compared with other<br />
European covered bond regimes. Please refer to the appendix of this study for further<br />
information on the calculation of lendable values.<br />
Breakdown of cover assets *) 60% loan-to-value ceiling<br />
Additional cover<br />
(substitute cover)<br />
max. 20%<br />
Ordinary cover<br />
min. 80%<br />
Source: DZ BANK; *) in % of the volume of mortgage pfandbriefe outstanding<br />
Special requirements for ship pfandbriefe<br />
Only loans that are secured by ship mortgages qualify as ordinary cover for ship<br />
pfandbriefe. The loan is limited to ships and to ships under construction which are recorded<br />
in a public register. The loans may not extend beyond the 20 th year of the ship’s life. The<br />
supervisory authority may allow exceptions in individual cases. Loans secured by ships or<br />
ships under construction, which are registered abroad, can also be included in the cover<br />
pool provided certain provisions that are defined in the PfandBG are met.<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
Ordinary cover<br />
60% loan‐to‐value ceiling<br />
Market value LTV LTV limit (60%)<br />
Ordinary cover<br />
21