Asset-Encumbrance: What will happen to unsecured bank bonds?

Federal Financial Supervisory Authority (BaFin)

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Date Published 2012
Primary Author Dr. Steffen Meusel
Other Authors
Theme Funding Housing Finance, Mortgage Bonds


The financial crisis led to a loss of confidence in banks. Investors became less willing to invest in unsecured bank bonds, or were only prepared to do so for higher rates of interest. This led to banks using increasingly secured funding—mainly covered bonds (in Germany Pfandbriefe), repurchase agreements (repos) and, due to the special circumstances, long-term refinancing operations (LTROs) of the European Central Bank (ECB). However, since the start of the crisis the proportion of asset-backed securities (ABS) has been falling. This article will throw more detailed light on how this development will affect the position of creditors holding unsecured claims.

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