If imitation is the sincerest form of flattery, the German issuers of Pfandbriefe – covered bonds – should be reassured by the spread of their 232-year-old refinancing idea. British, Irish, Spanish and Austrian knock-offs of the popular bonds launched last year and half a dozen more countries are following. Pfandbrief issuers welcome foreign competition, but are profoundly worried by a dangerous split in their own ranks.
Only 40 special German banks, private and public, are allowed to issue covered bonds. Half of them are private mortgage banks, chartered under the century-old Mortgage Bank Act. The public issuers, dominated by 12 state banks, dance to a different tune â the Public Pfandbrief Act.
