Monolines European banks have leapt on the US bandwagon of securitising and distributing mortgages to investors. The practice enabled rapid expansion of lending and lower prices for borrowers. It appeared a good deal for everyone.
Similar practices have a long and distinguished history in Germany, where banks have issued covered bonds – Pfandbriefe – backed both by mortgage assets and the issuing institution. Often these bonds had implicit government guarantees as they were issued by the Landesbanks, state-owned regional banks.
