Congruence of cover; order of increased minimum cover requirements

(1) The cover of outstanding Pfandbriefe by net present value, including interest and repayment obligations, must be ensured at all times. The net present value of the registered cover assets must exceed the net present value of the liabilities to be covered by 2 per cent (present-value overcollateralisation). The present-value overcollateralisation must consist of 1. debt securities, registered debt claims, treasury bills and treasury notes whose debtor is the Federation, a special fund of the Federation, a Land, the European Communities, another Member State of the European Union, another contracting state to the Agreement on the European Economic Area, the European Investment Bank, the International Bank for Reconstruction and Development, the Council of Europe Development Bank or the European Bank for Reconstruction and Development; this also applies to debt securities, registered debt claims, treasury bills and treasury notes whose debtor is Switzerland, the United Kingdom of Great Britain and Northern Ireland, the United States of America, Canada or Japan, provided their risk weight has been assigned to credit quality step 1 under Table 1 of Article 114(2) of Regulation (EU) No 575/2013, 2. debt securities for whose interest and repayment one of the bodies named in no. 1 has assumed the guarantee, 2a. deposits, provided the amount of the Pfandbrief bank's claims is already known at the time of acquisition, their satisfaction is not conditional, time-limited, contractually subordinated to other claims or otherwise restricted, and they are held at a) the European Central Bank, or b) central banks of the Member States of the European Union or other contracting states to the Agreement on the European Economic Area, 3. deposits, provided the amount of the Pfandbrief bank's claims is already known at the time of acquisition, their satisfaction is not conditional, time-limited, contractually subordinated to other claims or otherwise restricted, and they are held at suitable credit institutions, a) having their seat in one of the states named in no. 1, for which, insofar as it is not a Member State of the European Union or another contracting state to the Agreement on the European Economic Area, the European Commission has established the equivalence of the supervisory framework within the meaning of Article 107(4) of Regulation (EU) No 575/2013, b) to which a risk weight corresponding to credit quality step 1 or 2 has been assigned under Table 3 of Article 120(1) of Regulation (EU) No 575/2013, c) that do not belong to the same group within the meaning of section 10a(1), first sentence or (2), first sentence of the Banking Act as the Pfandbrief bank, and d) that, insofar as, under Article 2(5) of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338; L 208, 2.8.2013, p. 73; L 20, 25.1.2017, p. 1; L 203, 26.6.2020, p. 95; L 436, 28.12.2020, p. 77), as last amended by Directive (EU) 2022/2556 (OJ L 333, 27.10.2022, p. 153), that Directive does not apply to them, are subject to a domestic supervisory framework comparable to the respective national framework. The ratings of recognised international rating agencies are decisive for assignment to the credit quality steps. The limits of section 19(1), first sentence, no. 2(a) and (b), no. 3(a) to (c) and no. 4, including in conjunction with section 20(2), first sentence, no. 2, with section 26(1), first sentence, nos. 3 to 5, or with section 26f(1), first sentence, nos. 3 to 5, as well as of section 20(2), first sentence, no. 3(a) and (b), do not apply to this extent.
(1a) In addition, to secure liquidity for the next 180 days, a day-by-day reconciliation must be made of maturing claims from registered cover assets and maturing liabilities from outstanding Pfandbriefe and derivative transactions included in cover. For each day, the sum of the daily differences arising up to that day must be formed. The largest resulting negative sum in the next 180 days must at all times be covered by the sum of the registered cover assets that each satisfy the requirements of Articles 10, 11 or 12 of Commission Delegated Regulation (EU) 2015/61 of 10 October 2014 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for credit institutions (OJ L 11, 17.1.2015, p. 1), as amended by Delegated Regulation (EU) 2018/1620 (OJ L 271, 30.10.2018, p. 10), and are valued for this purpose under Article 9 of Delegated Regulation (EU) 2015/61, as well as the cover assets under subsection (1), third sentence, no. 3 whose remaining maturity does not exceed three months. For assets entered in the cover register exclusively to secure liquidity, the limits of sections 19, 20, 26 and 26f do not apply.
(2) The cover of outstanding Pfandbriefe of a class by their nominal value through the nominal value of the cover assets registered for that class must be ensured at all times. Where the maximum redemption value known at the time of the Pfandbrief issuance is higher than the nominal value, it takes the place of the nominal value. For cover assets that can be satisfied at less than their nominal value, the lower redemption value is decisive to that extent. In addition, the total amount of the nominal values of the cover assets registered for a class must exceed the total amount of the nominal values of the outstanding Pfandbriefe of that class by the following percentages (nominal-value overcollateralisation): 1. for mortgage Pfandbriefe and public Pfandbriefe, by at least 2 per cent, 2. for ship Pfandbriefe and aircraft Pfandbriefe, by at least 5 per cent. The second and third sentences apply accordingly. Cover assets used to satisfy the requirement for present-value overcollateralisation under subsection (1), first sentence may not also be used to satisfy the nominal-value overcollateralisation.
(3) Insofar as liabilities of the Pfandbrief bank arise from derivative transactions used as cover, the claims of the Pfandbrief bank's counterparties must also be covered in the same way as Pfandbrief liabilities.
(3a) BaFin may order, for each cover pool, that a Pfandbrief bank must satisfy cover requirements going beyond subsection (1), first and second sentences and subsection (2), each in conjunction with subsection (3), first sentence, where value-adequate cover of the liabilities from outstanding Pfandbriefe and derivative transactions included in cover does not appear to be ensured. The Pfandbrief bank must publish the circumstance of an order under the first sentence without delay, stating the corresponding amount of the additional requirement, on its website alongside the particulars published under section 28 for the relevant Pfandbrief class. An order under the first sentence must be revoked where its ground has demonstrably ceased to exist, but not earlier than three months after it was issued.
(3b) Subsection (3a), first and second sentences apply accordingly to deficiencies identified in the course of the annual audit or special examinations under section 44(1), third sentence of the Banking Act, including cover examinations under section 3(1), third sentence, that relate to the cover calculation under subsection (4), the maintenance of the cover register under section 5, the risk management requirements under section 27, the Pfandbrief-related reporting system under section 27a, compliance with the transparency provisions of section 28, the adequacy of the methods and processes used to determine present-value overcollateralisation under the Pfandbrief Net Present Value Ordinance, or the adequacy of the methods and procedures for determining mortgage lending value. An order made under the first sentence must be revoked where the Pfandbrief bank has proven to BaFin's satisfaction that the deficiency giving rise to the order has been remedied, or as soon as an examination has established that the deficiency giving rise to the order under the first sentence no longer persists and no new ground for the order exists.
(4) The Pfandbrief bank must ensure on an ongoing basis, by suitable calculations, and document in a comprehensible manner, that cover in conformity with this Act exists at all times. For cover in conformity with this Act, cover assets for which neither a land charge, nor a ship mortgage, nor a register lien or foreign aircraft mortgage has been created, nor a guarantee within the meaning of section 20(1) no. 2, second to fourth sentences exists, and for which or for whose debtor a default within the meaning of Article 178(1) of Regulation (EU) No 575/2013 is deemed to have occurred, may not be taken into account. The second sentence applies accordingly to guaranteed cover assets whose guarantor is thereafter deemed to have defaulted.
(5) A Pfandbrief is outstanding where the trustee has issued it under section 8(3) and handed it over to the Pfandbrief bank; insofar as it is ensured that a disposition over a Pfandbrief held by the Pfandbrief bank could not be carried out without the trustee's consent, the Pfandbrief is excluded from circulation for the duration of that safeguard. A Pfandbrief issued as an electronic security under section 2(1) of the Electronic Securities Act is outstanding as soon as the certificate required under section 8(3), first sentence has been deposited under section 8(3), third sentence.
(6) The Federal Ministry of Finance is authorised, by statutory instrument not requiring the consent of the Bundesrat, to determine details of the method for the net present value calculation under subsection (1), first and second sentences and section 4b(3), and the extent of interest-rate and exchange-rate changes that the cover under subsection (1), first sentence must at least withstand. The Federal Ministry of Finance may transfer this authorisation, by statutory instrument, to the Federal Financial Supervisory Authority. Before issuing the statutory instrument, the peak associations of the credit industry must be heard.
(7) It is prohibited to put Pfandbriefe of a Pfandbrief bank into circulation where their amount is not covered, in conformity with this Act, by the assets registered in the relevant cover register. It is also prohibited to dispose, by sale or encumbrance, of an asset registered in the cover register, for a Pfandbrief bank, to the detriment of the Pfandbrief creditors or the creditors of claims from derivative transactions under subsection (3), where the remaining assets registered in the relevant cover register are insufficient for the cover, in conformity with this Act, of the corresponding Pfandbriefe and the claims from derivative transactions under subsection (3). Pfandbriefe may not be put into circulation without the certificate required under section 8(3), first sentence.