Data and Technology in Covered Bond Market Infrastructure with Finnofleet #15

In this episode of Mortgages Covered,  Richard Kemmish, EMF-ECBC & ISMMA Consultant, is joined by Andrej Eichler and Matthias Neumann from Finnofleet, to discuss the critical role of data for issuers and how technology can improve operational efficiency.

This Episode of  Mortgages Covered covers:

1. The integration of Swiss and German operations into a unified group with a streamlined service offering.
2. Finnoofleet’s mission to enhance collateral management efficiency and help issuers maximize the benefits of covered bond funding.
3. The growing complexity of data and reporting requirements, and the need for systems to continuously adapt to regulatory and market expectations.
4. The export of proven DACH-region solutions to both established and emerging covered bond markets worldwide.

Transcript

SPEAKER_02 0:00

For an issue, one of the most important parts of structuring a cover bond is getting the data right. Getting the data on the underlying pools, integrating it with existing systems. It's a vital area and it becomes sometimes a very difficult area for issuers. I spoke to And Andre Eichler and Matthias Neumann of Finnofleet about what they do to help issuers in this area. Okay, so if you could basically start by just um introducing uh Finnofleet, I have to look, and why you why you've rebranded.

SPEAKER_00 0:37

Yeah, Richard, uh thanks so much for the question. So, you know, it's the first time for us to be at uh CBDC as Phenofleet as a group. So Phenufleet was created in 2021, and one of the first uh participants of this group was the company BaseNet in Switzerland, which is serving Fundbrief Bank and Fundfleet Centrales since decades. And uh then one and a half years ago, also um similar company TXS GMBH joined in Germany, which is serving uh all the Fundbrief emittents in Germany. So really great to be here as one group and present uh to the community uh what kind of services we can provide.

SPEAKER_02 1:15

So tell me what services you are presenting and what what's attracted the most interest from people visiting your stand?

SPEAKER_01 1:21

Well, I think uh our central mission is uh to make uh collateral management as a whole more efficient, and the special focus uh for sure is on covered bonds. And uh our uh product solutions allow uh covered bond issuers uh to keep many of the basis points safe by covered bond issuing in their own balances because the systems uh uh provide uh functionalities uh like, for example, automatic uh covered bond rating reports and so on. You don't need uh so much resources to fulfill uh covered issuance uh requests.

SPEAKER_02 2:06

In um in a previous life, I used to structure cover bonds, and I always remember one of the biggest problems was legacy systems in the banks. Some of them have been just built organically over time, had no intention to ever interface with the bond markets. What can you do with a legacy system like that?

SPEAKER_00 2:22

But I think that's exactly you know where we come from, to connect to all the backbones, uh, particularly in Germany, as you can imagine. You have on one hand for the saving banks, uh, Finanzinformatik, and for the cooperative sector, you have Artovia, but you also have uh huge banks like Deutsche Commerzbank, others who are having an own legacy system, which is from literally from the 70s, right?

SPEAKER_02 2:42

Yeah, so some of them are fairly old, incredible.

SPEAKER_00 2:45

Yeah, I even you know developed some of them in my youth a long time ago. Uh Richard, but I think you know that's the flexibility of our system that we can stay azure with uh with fund brief regulation because we're also part of VDP, you know, or um, but making sure with adapters with interfaces to connect to the particular uh core banking system behind. So we kind of create a layer in between.

SPEAKER_02 3:09

I remember you mentioned fanbrief the uh article on the fanbrief cachets which used to define the disclosure. We used to speak about that a lot, but it feels like we've moved on a lot with the data fields that need to be recorded, with harmonized transparency templates, with ESG data. Is it a constantly adapting template that you're developing? How difficult is that for banks?

SPEAKER_01 3:30

Well, uh, it is a little challenge, uh, to be honest, but uh in the end, uh after uh sufficient time for implementation, uh, we will have the actual report, and uh we are speaking about several reports. One, for example, for HTT, uh, another report for Moodis covered bond rating, and also HDT is a topic we discuss. And uh, in the end, uh for us as a supplier of a standard IT solution, uh, it is always uh a little challenge. Uh it is our task uh to keep the solutions actual to uh stakeholders' demands, so legal stakeholders as well as stakeholders of the capital market.

SPEAKER_02 4:16

I think um when you look at the conference like this, the the issuers here, the fan brief issuers or the Swiss covered bond issuers who are here. They're massive issuers, they're very in integrated with this kind of conference, they're sitting on the committees, but you also I think represent a lot of the much smaller issuers. Is there a tension between the smaller issues saying, oh God, this is so much hassle providing this, and the big one saying if the investor asks for it, the investor gets it?

SPEAKER_00 4:43

Let me start with a different way to answer it. You know, we have very good experience with pooling, right? Because if you have a pooling leg in Switzerland and there it's defined by law, then you don't have the tension per design, right? Because the fundprise bank is serving UBS alike to a very, very small issuer. So I think that's one of the models. Uh I think for us as a provider of technology, of the the rails, uh, we don't care if the bond as such is big or small, right? Um we want to be kind of fair to each and every size, if that makes sense.

SPEAKER_02 5:13

But if I'm only issuing, I don't know, 200 million euros a year, all of it in traditional format or private placements, and then there's another roll out of the harmonized transparency template, and I need to make collect more data, report more data, interface your systems more. Don't they get a bit fed up with these constantly improving transparency standards?

SPEAKER_01 5:34

Well, uh from time to time, uh requests uh by different stakeholders are changing, and that means uh we need new entities, new data, new attributes, and so on. And this normally leads to a change in our solutions, and uh that's uh uh I could say daily busyness in our branch.

SPEAKER_02 5:56

And and you guys have got um you've got your roots in the traditional market. Are you looking at the newer markets, the emerging markets in new jurisdictions? Is that part of why you're here today?

SPEAKER_00 6:05

I mean, I was fascinated now by uh in the presentation from Moldova, uh, because obviously Moldova is very close to Romania, also from um kind of you know historical perspective. And I think the rails we laid here in the Dach region, so Germany, Austria, Switzerland, we for instance just recently extended towards Liechtenstein, right? So we we took our system and together with Fandbrief Bank, we created a Fundbrief Institute in Liechtenstein using exactly the same system using the same rails. So I think it can be really exported up to, as we discussed this morning, up to Jerevan, which is still Europe.

SPEAKER_01 6:36

Yeah, and beyond Europe, why not? Yes, we are fully open-minded uh to serve emerging covered bond uh issue in countries.

SPEAKER_00 6:49

Hopefully, you know, still 12 years to my pension, so looking forward.

SPEAKER_02 6:53

Yeah, exactly. Great. Well, good luck with this, and thanks very much for joining us today.

SPEAKER_00 6:58

Thanks so much for having us, Richard.