Pfandbriefe are basically covered bank bonds (e.g. Mortgage Pfandbriefe and Public Pfandbriefe). Pfandbriefe are issued by various credit institutions that operate the Pfandbrief business (“Pfandbrief banks”). However, in accordance with the Pfandbrief Act, you need a license from the Federal Financial Supervisory Authority (BaFin) to operate the Pfandbrief business, which is an absolute must.

In addition, strict regulations apply with regard to collateralisation. For example, mortgage Pfandbriefe must be secured or covered in full at all times by (usually first-rate) mortgages and public Pfandbriefe in full by loans to public borrowers. In the event of the issuer's insolvency, the Pfandbrief creditors have a so-called priority satisfaction over all other unsecured creditors in relation to these cover assets.

​