...The 180day liquidity rule introduced in the amendment of the German Pfandbrief law in March 2009 came into force on 1 November 2009. In Fitch Ratings' view, although the text of the law leaves issuers with some flexibility in its practical implementation, it improves significantly, in the event of an issuer default, the likely continuity of payments on German Pfandbriefe, which are issued as hard bullets. It has helped to insulate mortgage Pfandbriefe from rating downgrades in connection with Fitch's updated covered bond liquidity risk assessment (published on 7 July 2009) and also contributes to reducing the vulnerability of public sector Pfandbrief ratings to potential downgrades of their issuer. The German liquidity provision is a unique feature in the current European covered bond legislative landscape, as all other frameworks impose maximum rather than minimum limits by capping the proportion of socalled substitute assets in the cover pool. For example, under the Spanish mortgage market...
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