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Founded in 1989 in Luxembourg with a licence for general banking, EUROHYPO Europäische Hypothekenbank S.A. (Eurohypo Luxembourg) initially conducted mortgage banking business. But as there was not yet a law in Luxembourg regulating this type of business Eurohypo Luxembourg inserted the rules it followed into its articles of associoation. These rules were based on German Mortgage Banking Act.

After having received a special purpose banking licence in September 1999, Eurohypo Luxembourg is authorised to issue Lettres de Gage according to the Luxembourg Mortgage Bank Law Law dated 21 November1997, which became Art. 12-1 to 12-9 of the Law of 5 April 1993 on the Financial Sector.

This law is closely modelled on the German Mortgage Bank Act and has been included within the framework of Luxembourg Bank Law. Its aim is to combine the first rate quality of Pfandbriefe as an investment with a high degree of flexibility of the business field (internationalisation of lending activities).

The strong influence of the German Mortgage Bank Act is also reflected in the establishment of the special purpose bank principle in Luxembourg (limited to low risk business, preferential right of satisfaction of Pfandbrief investors, limitation of volume of Pfandbriefe outstanding to 60 times equity capital).

The collateral pools have been separated into mortgage and public sector debt collateral pools. The law also requires that derivative transactions concluded for hedging purposes, shall be included within the respective collateral pools.

Substitute cover is restricted to 20% of the nominal amount of Lettres de Gage in circulation for each collateral pool.

The external supervision of the business activities is carried out by three independent institutions:

• The special auditor (réviseur spécial), who supervises the composition of the collateral pools and the principle of integral matching (congruence of currency, interest rates and cover). This function is comparable to that of the trustee of the German Mortgage Bank Act
• The independent auditors (réviseurs d'entreprise)
• The Luxembourg Supervisory Authority (CSSF)

Lettres de Gage qualify as tier 1 paper.

With regard to the current regulations they are eligible for repo transactions with the European Central Bank (www.ecb.int) and the Swiss National Bank (www.snb.ch) .

The investment guidelines of insurance and investment funds as well as the privilege of a 10% risk weighting evidence the high quality and security of the Lettres de Gage.

Eurohypo Luxembourg focuses on public sector lending to the EU, the EEA and the OECD countries.
Its credit policy never disregards the rating of the borrower/ the asset, which principally has to be investment grade, and does not focus only on the rating of a guarantor. That is in particular the case for assets the credit-worthiness of which is enhanced by US monoline insurers.
The bank will issue all types of current debt instruments depending on market conditions and investor interest.

Eurohypo Luxembourg is Luxembourg´s biggest and leading Mortgage Bank.