Germany

Rating action: Moody’s yesterday (Tuesday) placed on review for downgrade Bayerische Landesbank’s Aa2 rating, citing pressure on the bank’s financial strength rating and the bank’s changing shareholder structure.

Rating action: Standard & Poor’s today (Tuesday) placed WestLB’s A- rating on CreditWatch with negative implications, but gave the all clear on other Landesbank ratings following reports that these banks’ owners are prepared to provide them with support.

The Association of German Pfandbrief Banks has put forward new proposals to change the Pfandbrief Act on top of those included in the draft amendment that the ministry of finance has approved. Elsewhere, more dramatic changes to the business models of some issuers have also been suggested.

Hypo Real Estate completed the merger of HRE Bank International AG and HRE Bank AG yesterday (Thursday). Fitch reacted by saying that a multi-notch downgrade of HRE Bank’s Pfandbriefe is possible unless the bank addresses increased risks in the merged cover pools.

Rating action: Moody’s yesterday (Tuesday) put HSH Nordbank’s Schiffspfandbriefe on review for downgrade as a result of the downgrade of the bank’s senior rating from Aa2 to Aa3 last week.

Rating action: Moody’s has downgraded HSH Nordbank from Aa2 to Aa3, on stable outlook, because of a cut in its bank financial strength rating resulting from an increased risk profile and stretched financial profile.

Anyone worried about deteriorating asset quality and the state of European mortgage markets would have felt their spirits lifting during the opening panel of the European Mortgage Federation’s sixth annual conference in Brussels yesterday (Thursday). Representatives from Denmark, Poland, the Netherlands, Germany and Belgium painted a reassuring picture of the state of their country’s mortgage markets.

SoFFin, the German Financial Markets Stabilisation Fund, has blasted the Landesbanks for being too slow in recapitalising themselves and dismissed claims that it is being too slow in providing banks with help.

The corporate bond market is booming, KfW has celebrated its 60th birthday with a bumper order book, and government guaranteed issuance is spreading. However, all this is happening at a price. And apart from the odd tap, the covered bond market can do no more than watch the new pricing landscape take shape.

The Association of German Pfandbrief Banks (vdp) has relaxed the minimum standards for increases to jumbo Pfandbriefe to make it easier for issuers and dealers to offer paper in the illiquid market conditions. Some bankers were sceptical that the move would provoke much supply, but one was hopeful that it might presage a broader discussion about minimum jumbo standards.

Henning Rasche is leaving Eurohypo, where he was a member of the board of managing directors. He will, however, remain president of the Association of German Pfandbrief Banks (vdp).

Germany’s once staid banking system reinvented itself during the boom years, but the credit crisis has revealed some unpleasant truths. Chris Dammers asks how the sector will make its way out of the current mess. From EuroWeek’s Germany in the Capital Markets supplement.