London, 03-31-98 -- Because of changes to the German Mortgage Banking Act, which take effect tomorrow -- April 1, 1998, Moody's reviewed its rating approach for both types of German Pfandbriefe – mortgage Pfandbriefe and public-sector Pfandbriefe -- issued by German mortgage banks, concluding that the current rating approach adequately takes into account these legislative modifications.
According to Moody's, the most rating-relevant change to the Mortgage Banking Act concerns the treatment of the asset pools securing Pfandbriefe in the event of bankruptcy proceedings. The previous uncertainty surrounding the asset pools' acceleration and inclusion in a bank's bankruptcy proceedings has been addressed, to the extent that the bank regulators can now legally initiate bankruptcy proceedings solely against a mortgage bank, while keeping the asset pools that meet the regulatory framework requirements distinctly separate. However, bankruptcy proceedings can still be initiated against the asset pools by the bank regulators, if these pools fail to comply with the stipulated criteria of the Mortgage Banking Act.
In the context of the changes to the Mortgage Banking Act, Moody's said that it will continue to follow its fundamental rating approach for German Pfandbriefe, whereby Pfandbrief ratings are driven by the creditworthiness of the issuing mortgage bank. However, Moody's upgraded the Hypothekenpfandbriefe (mortgage bonds) of four mortgage banks as well as the oeffentliche Pfandbriefe (public-sector secured bonds) of one mortgage bank. In Moody's opinion, these upgrades reflect the even more reduced likelihood of contamination of the asset pools from a mortgage bank in financial distress. The widened rating level span between a mortgage bank's long-term deposit rating and its Pfandbrief ratings recognises the already significantly reduced severity-of-loss for Pfandbrief investors, coupled with a now lower expected frequency of default in relation to a mortgage bank's unsecured creditors. Even so, absolute bankruptcy remoteness of the asset pools is not assured (as would be the case in mortgage backed security structures), since there is no formal recognition of over-collateralisation, alternate liquidity provision or an alternate service provider. As before, over-collateralisation of the asset pools is not a legal requirement of the Mortgage Banking Act. Whilst coincidental over-collateralisation of the respective asset pools at the time of a mortgage bank's bankruptcy is possible, its likelihood is considered by Moody's to be relatively low. To the extent that over-collateralisation should occur in such a stressed situation, the bank regulators would now have the ability to check the regulatory compliance of the asset pools before releasing any over-collateralisation back to the bank's bankruptcy estate. Once such a transfer of over-collateralisation from the asset pool has occurred, further asset substitution or replenishment would not be feasible.
In widening the rating differential between a mortgage bank's long-term deposit rating and its Pfandbrief ratings, Moody's also takes the view that, in a worst case scenario, where fully compliant asset pools may now be managed separately alongside an insolvent or bankrupt mortgage bank, such asset pools are consequently far more fungible. As such, the timely purchase by a healthy mortgage bank peer of such an asset pool is now expected to be both more straightforward and more likely. Even so, Moody's said that it continues to view mortgage Pfandbriefe in relation to public-sector Pfandbriefe of the same issuer to possess potentially different severity-of-loss characteristics.
The following ratings were raised:
Allgemeine Hypothekenbank AG – the bank's public-sector Pfandbriefe to Aa1 from Aa2 and its mortgage Pfandbriefe to Aa2 from Aa3.
Deutsche Pfandbrief und Hypothekenbank AG -- the bank's mortgage Pfandbriefe to Aaa from Aa1.
Hypothekenbank in Essen AG -- the bank's mortgage Pfandbriefe to Aaa from Aa1.
Muenchener Hypothekenbank eG – the bank's mortgage Pfandbriefe to Aaa from Aa1.
The following ratings were confirmed:
Allgemeine Hypothekenbank AG – the bank's long- and short-term deposits at A2 and P-1 respectively; the bank financial strength rating at C.
Bayerische Vereinsbank AG – the bank's public sector and mortgage Pfandbriefe at Aaa; long- and short-term deposits at Aa2 and P-1 respectively; the bank financial strength rating at B+.
Bayerische Hypotheken und Wechselbank AG -- the bank's public sector and mortgage Pfandbriefe at Aaa; long- and short-term deposits at Aa2 and P-1 respectively; the bank financial strength rating at B+.
Deutsche Pfandbrief und Hypothekenbank AG -- the bank's public-sector Pfandbriefe at Aaa; long- and short- term deposits at Aa3 and P-1 respectively; the bank financial strength rating at C+.
Frankfurter Hypothekenbank Centralboden AG -- the bank's public sector and mortgage Pfandbriefe at Aaa; long- and short-term deposits at Aa2 and P-1 respectively; the bank's financial strength rating at B.
Hypothekenbank in Essen AG -- the bank's public-sector Pfandbriefe at Aaa; short-term deposits at P-1; the bank financial strength rating at C.
Muenchener Hypothekenbank eG -- the bank's public-sector Pfandbriefe at Aaa; long-and short-term deposits at Aa3 and P-1 respectively; the bank's financial strength rating at C+.
RHEINHYP Rheinische Hypothekenbank AG – the bank's public-sector Pfandbriefe at Aaa; short-term deposits at P-1.
The following ratings remain on review for possible downgrade:
Hypothekenbank in Essen AG – the bank's mortgage Pfandbriefe at Aaa; the long-term deposits at Aa3.
RHEINHYP Rheinische Hypothekenbank AG – the bank's mortgage Pfandbriefe at Aaa; the long-term deposits at Aa2; the bank financial strength rating at B.
MOODY'S AFFIRMS ITS FUNDAMENTAL ANALYTICAL APPROACH IN RATING GERMAN PFANDBRIEFE, BUT WIDENS THE DIFFERENTIAL BETWEEN PFANDBRIEF RATINGS AND THE ISSUING MORTGAGE BANK'S UNSECURED LONG-TERM RATING
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at
www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.