1. Distinction between EU/EEA-countries and third states

As concerns the eligibility criteria in the the field of cross-border public finance, there is a distinction between the EU/EEA-countries on the one hand and Switzerland, USA, Canada and Japan on the other.

Public-sector borrowers from other EU/EEA-countries

In EU/EEA countries, claims against sovereigns, their central banks and the sub-sovereign entities are eligible for the cover pool.

Public-sector borrowers from Switzerland, the USA, Canada and Japan

Where Switzerland, the USA, Canada, Japan and their central banks and sub-sovereign entities are concerned, the eligibility for the cover pool is linked in each case to the requirement that the public-sector borrower has been allocated to credit quality step 1.

In the case of sub-sovereigns, the respective state’s choice of method according to the Basel II-agreement, i.e. whether it has opted for the “central government risk weight based method” or the “credit assessment based method”, is important with regard to the determination of the credit quality step.

2. International organizations and multilateral development banks
Also eligible for the public cover pool are claims against the European Central Bank, multilateral development banks and international organizations as defined by the Banking Directive (2006/48/EC):

In Annex VI No. 4 the Banking Directive contains a list of development banks being allocated to credit quality step 1.

The term “international organizations” refers to the European Community, the International Monetary Fund and the Bank for International Settlements (Annex VI No. 5 of the Banking Directive).

3. Foreign export credit agencies
With the amendment of the Pfandbrief Act in 2009 also export credit agencies domiciled in EU/EEA-countries are included in the scope of the eligible guarantors according to § 20 par. 1 sent. 1 No. 2 PBA, provided they meet the criteria for a “public sector entity” as defined by the Banking Directive 2006/48/EC.

4. The “10%-limit” (§ 20 par. 1 sent. 2 PBA)
As concerns cross-border public-sector lendings it is important that the Pfandbrief creditors’ preferential claim in case of insolvency can be enforced in the respective country. For claims in the case of which this preferential claim is not assured, the Pfandbrief Act provides for an upper limit of 10% of the total volume.

It usually requires an extensive legal research of the respective national law in order to ascertain the existence of such a preferential claim in case of insolvency.


Stöcker, Otmar: Ausländische Deckungswerte und Insolvenzvorrecht der Pfandbriefe, in: Immobilie und Finanzierung 16/2003, S. 574 ff.

Stürner / Kern: Deutsche Öffentliche Pfandbriefe und japanische Deckungswerte, vdp-Schriftenreihe, Band 24, Berlin 2006

Stürner: Deutsche öffentliche Pfandbriefe und Deckungswerte aus Darlehen an U.S.-amerikanische öffentliche Körperschaften, vdp-Schriftenreihe, Band 19, Berlin 2005

Stöcker, Otmar: § 86 a: Grundzüge des Pfandbriefrechts. In: Schimansky/Bunte/Lwowski: Bankrechts-Handbuch. München 2007

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