Development of the Pfandbrief
 Mortgage Pfandbriefe
 Public (municipal) Pfandbriefe
 Covered bonds

Basic Information

» The Austrian Pfandbrief and covered bonds – Basic information

  • Pfandbriefe and covered bonds are debentures issued under a special legal framework and securitised by their own cover pool.

    • In Austria, they are provided with the following statutory security features that offer investors a high degree of protection and transparency:

      • Separate legislative basis for Pfandbriefe and covered bonds
        • Mortgage Bank Act (Hypothekenbankengesetz, HypBG) since 1899 and 1938
        • Pfandbrief Act (Pfandbriefgesetz, PfandbriefG) since 1927 and 1938
        • 1905 Act on Covered Bond Issuance (Gesetz von 1905 betreffend fundierte Bankschuldverschreibungen, FBschVG)

      • The bond issuers maintain their own cover pool to securitise the Pfandbrief or the covered bond on their balance sheets

        • Eligible claims for the cover pool are mortgage claims or local community claims
        • In the event of insolvency the cover pool is administered separately from the issuer’s remaining assets and serves first of all to service the claims of Pfandbrief and covered bond creditors

        • For claims going beyond the asset cover, the issuer is additionally liable with all its assets (on an equal footing with non-securitised creditors)

        • Minimum surplus cover of the asset cover
        • is stipulated by law
        • Regular review of the cover pool by government-appointed trustees or government commissioners

      • The issuers have a banking licence and are subject to the Austrian banking regulator

        Austrian Pfandbriefe and covered bonds meet the requirements of article 22 (4) of the UCITS Directive (85/611/EEC) and are eligible for investment of trust moneys by virtue of the provisions of the Trustee Act 1925 (as amended by the Trustee Investment Act 1961).

    • Austrian Pfandbriefe and covered bonds look back on a first-rate credit history: since the legislative basis came into force, there has never been a default.

    • They are an essential source of refinancing for banks and an interesting investment for investors, combining return on investment and security. Their importance for financial markets, in particular in a financial crisis, was underscored by the EUR 60 billion covered bond buy-up programme introduced by the ECB in 2009.