The ECB’s stance is reflected in comments by Sabine Lautenschläger of the ECB’s Executive Board when she stated that “the euro entity should not be an empty shell where the credit risk stays in the euro area, and all of the market risks are booked and governed and managed outside of the euro area16” The result is that much of the heat is now gone out of the regulatory arbitrage issue, although we will continue to work hard to maintain consistent approaches as new issues arise and the work on key issues develops and deepens17.
The German “Pfandbrief” became so popular that other European countries copied the idea. Investors can gain some additional yield over public bonds, but without much risk. About 38 per cent of the issuers are triple-A-rated. “Pfandbriefe” are now issued in larger volumes and are placed internationally.