U.S. Rep. Scott Garrett, Jens Tolckmitt Meet on Covered Bonds

WASHINGTON, D.C. — U.S. Rep. Scott Garrett (R-NJ) received Jens Tolkmitt, Executive Director of the Association of German Pfandbrief Banks (vdp), at his Capitol Hill office (Jan. 28) to talk about covered bonds — a topic on which Rep. Garrett has been playing a leading role in Congress.

Jens Tolckmitt (left) with Congressman Garrett"I welcome the interest of the Association of German Pfandbrief Banks in the development of a covered bond market in the United States," Rep. Garrett said later.  "It was a pleasure to meet with Jens Tolckmitt to discuss issues pertinent to the creation of the U.S. market.  His insights were extremely useful and he provided me with a thorough overview of not only the German covered bond market, but others in Europe as well.

"I appreciate the opportunity to learn more about the way the German Pfandbrief market works and what lessons we can learn from them as we move forward in establishing a covered bond marketplace here in the United States."

The visit was Tolckmitt's first to a Congressional office, for a meeting that lasted about 45 minutes.

"It was a great honor to meet with Congressman Garrett," Tolckmitt said.  "We believe that covered bonds, a reliable source of funding, will be an effective addition to securitization in the United States in order to provide liquidity for financial institutions.  In Germany, we have been following initiatives to help facilitate a robust covered bond market in the U.S. with great interest.

"If the Association can be of help in any way during the months ahead, for instance by sharing our experience in creating a sound legislative basis, we would be delighted to do so.  The recent developments in the U.S. have been very encouraging. I applaud Congressman Garrett for his leadership in creating a covered bond market in the United States."

Rep. Garrett is a leading proponent of covered bond legislation to provide a specific U.S. legal framework for the funding tool.  At his urging, last month the U.S. House Financial Services Committee held a hearing titled "Covered Bonds: Prospects for a U.S. Market Going Forward."

Germany has a centuries-old tradition of using covered bonds for funding, along with a variety of other financing options.  Its legislatively-supported version is called a "Pfandbrief." The Association of German Pfandbrief Banks (Verband deutscher Pfandbriefbanken, or "vdp") offers a wide range of services to Pfandbrief-issuing banks.

Covered bonds are debt obligations that have recourse to a pool of assets — the cover pool — that secures or "covers" the bond if the issuer becomes insolvent.  To date, they have primarily been used for real estate and public sector financing in Europe.