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Rating Action:

Moody's affirms ratings of Canadian bank covered bond programs

Global Credit Research - 11 May 2017

Toronto, May 11, 2017 -- Moody's Investors Service (Moody's) has affirmed the ratings of all series of covered bonds issued under the Bank of Montreal Global Registered Covered Bond Program, CIBC Legislative Global Covered Bond Programme, National Bank of Canada Legislative Global Covered Bond Programme, RBC Global Covered Bond Programme, The Bank of Nova Scotia Global Registered Covered Bond Program, The Toronto-Dominion Bank - Global Legislative Covered Bond Programme, and CIBC Global Public Sector Covered Bond Programme. This follows Moody's downgrade of the Baseline Credit Assessments, the long-term ratings and the Counterparty Risk Assessments (CR assessments) of the issuing banks.

The rating actions on the issuing banks were the result of a change in Moody's assessment of Canada's Macro Profile to "Strong + " from "Very Strong -". The Macro Profile change reflects Moody's expectation of a more challenging operating environment for banks in Canada for the remainder of 2017 and beyond, that could lead to a deterioration in the banks' asset quality, and increase their sensitivity to external shocks. See the related press release for details, "Moody's downgrades Canadian banks," at https://www.moodys.com/research/Moodys-downgrades-Canadian-Banks--PR_366355

Effective 11 May 2017, the Canadian Imperial Bank of Commerce (CIBC) reinstated the Asset Percentage Setting Agreement between CIBC Covered Bond (Legislative) GP Inc., CIBC Covered Bond (Legislative) Guarantor Limited Partnership, Canadian Imperial Bank of Commerce (CIBC) and Computershare Trust Company of Canada, under which the maximum Asset Percentage (AP) for the CIBC Legislative Global Covered Bond Programme is set at 93.5%, which results in a minimum level of overcollateralization of 7%. The minimum level of committed overcollateralization that is consistent with the Aaa rating of the covered bonds issued under this program is currently 3.5%

The complete rating actions are as follows:

Issuer: Bank of Montreal Global Registered Covered Bond Program

Series CBL1, Affirmed Aaa; previously on May 8, 2014 Assigned Aaa

Series CBL2, Affirmed Aaa; previously on Jan 22, 2015 AssignedAaa

Series CBL3, Affirmed Aaa; previously on Jan 29, 2015 Assigned Aaa

Series CBL4, Affirmed Aaa; previously on Aug 5, 2015 Assigned Aaa

Series CBL5, Affirmed Aaa; previously on Sep 21, 2015 Assigned Aaa

Series CBL6, Affirmed Aaa; previously on Sep 29, 2015 Assigned Aaa

Series CBL7, Affirmed Aaa; previously on Jan 14, 2016 Assigned Aaa

Series CBL8, Affirmed Aaa; previously on Apr 19, 2016 Assigned Aaa

Series CBL9, Affirmed Aaa; previously on Jun 15, 2016 Assigned Aaa

Series CBL10, Affirmed Aaa; previously on Oct 20, 2016 Assigned Aaa

Series CBL11, Affirmed Aaa; previously on Jan 11, 2017 Assigned Aaa

Issuer: CIBC Global Public Sector Covered Bond Programme

Public Sector Series CB6 Due 6/30/2017, Affirmed Aaa; previously on Jun 30, 2010 Assigned Aaa

Public Sector Series CB14 Due 2/13/2019, Affirmed Aaa; previously on Feb 13, 2012 Assigned Aaa

Issuer: CIBC Legislative Global Covered Bond Programme

Series CBL 1, Affirmed Aaa; previously on Aug 7, 2013 Assigned Aaa

Series CBL 3, Affirmed Aaa; previously on Oct 17, 2014 Assigned Aaa

Series CBL 4, Affirmed Aaa; previously on Jan 16, 2015 Assigned Aaa

Series CBL 5, Affirmed Aaa; previously on Jan 28, 2015 Assigned Aaa

Series CBL 6, Affirmed Aaa; previously on Jun 12, 2015 Assigned Aaa

Series CBL 7, Affirmed Aaa; previously on Jul 21, 2015 Assigned Aaa

Series CBL 8, Affirmed Aaa; previously on Dec 14, 2015 Assigned Aaa

Series CBL 9, Affirmed Aaa; previously on Dec 22, 2015 Assigned Aaa

Series CBL10, Affirmed Aaa; previously on Mar 11, 2016 Assigned Aaa

Series CBL11, Affirmed Aaa; previously on Apr 19, 2016 Assigned Aaa

Series CBL12, Affirmed Aaa; previously on Jul 26, 2016 Assigned Aaa

Series CBL13, Affirmed Aaa; previously on Oct 25, 2016 Assigned Aaa

Series CBL14, Affirmed Aaa; previously on Oct 26, 2016 Assigned Aaa

Series CBL15, Affirmed Aaa; previously on Jan 10, 2017 Assigned Aaa

Issuer: National Bank of Canada Legislative Global Covered Bond Programme

Series CBL 1, Affirmed Aaa; previously on Dec 17, 2013 Assigned Aaa

Series CBL 2, Affirmed Aaa; previously on Mar 26, 2014 Assigned Aaa

Series CBL 3, Affirmed Aaa; previously on Jan 26, 2015 Assigned Aaa

Series CBL 4, Affirmed Aaa; previously on Apr 20, 2015 Assigned Aaa

Series CBL 5, Affirmed Aaa; previously on Sep 29, 2016 Assigned Aaa

Series CBL 6, Affirmed Aaa; previously on Sep 29, 2016 Assigned Aaa

Issuer: RBC Global Covered Bond Programme

Series CB2, Affirmed Aaa; previously on Jan 23, 2008 Assigned Aaa

Series CB6, Affirmed Aaa; previously on Mar 30, 2011 Assigned Aaa

Series CB7 Tranche 1a, Affirmed Aaa; previously on Apr 21, 2011 Assigned Aaa

Series CB7 Tranche 1b, Affirmed Aaa; previously on Apr 21, 2011 Assigned Aaa

Series CB7 Tranche 2, Affirmed Aaa; previously on Jun 28, 2011 Assigned Aaa

Series CB7 Tranche 3, Affirmed Aaa; previously on Aug 23, 2011 Assigned Aaa

Series CB8, Affirmed Aaa; previously on Sep 19, 2012 Assigned Aaa

Series CB11, Affirmed Aaa; previously on Aug 1, 2013 Assigned Aaa

Series CB13, Affirmed Aaa; previously on Oct 1, 2013 Assigned Aaa

Series CB14, Affirmed Aaa; previously on Oct 29, 2013 Assigned Aaa

Series CB15, Affirmed Aaa; previously on Jun 19, 2014 Assigned Aaa

Series CB16, Affirmed Aaa; previously on Sep 25, 2014 Assigned Aaa

Series CB17, Affirmed Aaa; previously on Sep 25, 2014 Assigned Aaa

Series CB18, Affirmed Aaa; previously on Feb 5, 2015 Assigned Aaa

Series CB19, Affirmed Aaa; previously on Mar 23, 2015 Assigned Aaa

Series CB20, Affirmed Aaa; previously on Mar 23, 2015 Assigned Aaa

Series CB21, Affirmed Aaa; previously on Jun 18, 2015 Assigned Aaa

Series CB22, Affirmed Aaa; previously on Jul 21, 2015 Assigned Aaa

Series CB23, Affirmed Aaa; previously on Jul 21, 2015 Assigned Aaa

Series CB24, Affirmed Aaa; previously on Jul 24, 2015 Assigned Aaa

Series CB25, Affirmed Aaa; previously on Sep 16, 2015 Assigned Aaa

Series CB26, Affirmed Aaa; previously on Oct 15, 2015 Assigned Aaa

Series CB27, Affirmed Aaa; previously on Dec 16, 2015 Assigned Aaa

Series CB28, Affirmed Aaa; previously on Jan 14, 2016 Assigned Aaa

Series CB29, Affirmed Aaa; previously on Mar 11, 2016 Assigned Aaa

Series CB30, Affirmed Aaa; previously on Mar 11, 2016 Assigned Aaa

Series CB31, Affirmed Aaa; previously on Mar 23, 2016 Assigned Aaa

Series CB32, Affirmed Aaa; previously on Apr 26, 2016 Assigned Aaa

Series CB33, Affirmed Aaa; previously on Sep 14, 2016 Assigned Aaa

Series CB34, Affirmed Aaa; previously on Jan 11, 2017 Assigned Aaa

Issuer: The Bank of Nova Scotia Global Registered Covered Bond Program

Series CBL1, Affirmed Aaa; previously on Apr 2, 2014 Assigned Aaa

Series CBL2, Affirmed Aaa; previously on Sep 11, 2014 Assigned Aaa

Series CBL3, Affirmed Aaa; previously on Sep 17, 2014 Assigned Aaa

Series CBL4, Affirmed Aaa; previously on Nov 4, 2014 Assigned Aaa

Series CBL5, Affirmed Aaa; previously on Nov 12, 2014 Assigned Aaa

Series CBL6, Affirmed Aaa; previously on Jan 21, 2015 Assigned Aaa

Series CBL7, Affirmed Aaa; previously on Apr 14, 2015 Assigned Aaa

Series CBL8, Affirmed Aaa; previously on Jul 27, 2015 Assigned Aaa

Series CBL9, Affirmed Aaa; previously on Aug 11, 2015 Assigned Aaa

Series CBL10, Affirmed Aaa; previously on Sep 28, 2015 Assigned Aaa

Series CBL11, Affirmed Aaa; previously on Jan 14, 2016 Assigned Aaa

Series CBL12, Affirmed Aaa; previously on Jan 21, 2016 Assigned Aaa

Series CBL13, Affirmed Aaa; previously on Mar 10, 2016 Assigned Aaa

Series CBL14, Affirmed Aaa; previously on Apr 26, 2016 Assigned Aaa

Series CBL15, Affirmed Aaa; previously on Sep 14, 2016 Assigned Aaa

Series CBL16, Affirmed Aaa; previously on Sep 21, 2016 Assigned Aaa

Series CBL17, Affirmed Aaa; previously on Oct 3, 2016 Assigned Aaa

Series CBL18, Affirmed Aaa; previously on Jan 17, 2017 Assigned Aaa

Issuer: The Toronto-Dominion Bank - Global Legislative Covered Bond Programme

Series CBL1, Affirmed Aaa; previously on Jul 29, 2014 Assigned Aaa

Series CBL2, Affirmed Aaa; previously on Sep 22, 2014 Assigned Aaa

Series CBL3, Affirmed Aaa; previously on Sep 25, 2014 Assigned Aaa

Series CBL4, Affirmed Aaa; previously on Oct 29, 2014 Assigned Aaa

Series CBL 5, Affirmed Aaa; previously on Nov 14, 2014 Assigned Aaa

Series CBL6, Affirmed Aaa; previously on Apr 2, 2015 Assigned Aaa

Series CBL7, Affirmed Aaa; previously on Apr 16, 2015 Assigned Aaa

Series CBL8, Affirmed Aaa; previously on Apr 27, 2015 Assigned Aaa

Series CBL9, Affirmed Aaa; previously on Jun 15, 2015 Assigned Aaa

Series CBL10, Affirmed Aaa; previously on Jan 12, 2016 Assigned Aaa

Series CBL11, Affirmed Aaa; previously on Feb 3, 2016 Assigned Aaa

Series CBL12, Affirmed Aaa; previously on Mar 15, 2016 Assigned Aaa

Series CBL13, Affirmed Aaa; previously on Apr 27, 2016 Assigned Aaa

Series CBL14, Affirmed Aaa; previously on Jun 8, 2016 Assigned Aaa

Series CBL15, Affirmed Aaa; previously on Jan 20, 2017 Assigned Aaa

Series CBL16, Affirmed Aaa; previously on Mar 13, 2017 Assigned Aaa

Series CBL17, Affirmed Aaa; previously on Apr 3, 2017 Assigned Aaa

RATINGS RATIONALE

The ratings on the Canadian covered bond programs were assessed to determine the impact of the downgrade to the issuers' CR assessments under Moody's Timely Payment Indicator (TPI) framework.

KEY RATING ASSUMPTIONS/FACTORS

Moody's determines covered bond ratings using a two-step process: an expected loss analysis and a TPI framework analysis.

EXPECTED LOSS: Moody's uses its Covered Bond Model (COBOL) to determine a rating based on the expected loss on the bond. COBOL determines expected loss as (1) a function of the probability that the issuer will cease making payments under the covered bonds (a CB anchor event); and (2) the stressed losses on the cover pool assets following a CB anchor event.

The CB anchor for each of these programs is the CR assessment. The CR assessment reflects an issuer's ability to avoid defaulting on certain senior bank operating obligations and contractual commitments, including covered bonds.

The cover pool losses are an estimate of the losses Moody's currently models following a CB anchor event. Moody's splits cover pool losses between market risk and collateral risk. Market risk measures losses stemming from refinancing risk and risks related to interest-rate and currency mismatches (these losses may also include certain legal risks). Collateral risk is derived from the collateral score, which measures losses resulting directly from the cover pool assets' credit quality.

TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI), which measures the likelihood of timely payments to covered bondholders following a CB anchor event. The TPI framework limits the covered bond rating to a certain number of notches above the CB anchor. The TPI assigned to all Canadian covered bond programs is "Probable"

Factors that would lead to a downgrade of the ratings:

The CB anchor is the main determinant of a covered bond program's rating robustness. A change in the level of the CB anchor could lead to a downgrade of the covered bonds. The TPI Leeway measures the number of notches by which Moody's might lower the CB anchor before the rating agency downgrades the covered bonds because of TPI framework constraints.

A multiple-notch downgrade of the covered bonds might occur in certain circumstances, such as (1) a country ceiling or sovereign downgrade capping a covered bond rating or negatively affecting the CB Anchor and the TPI; (2) a multiple-notch downgrade of the CB Anchor; or (3) a material reduction of the value of the cover pool.

RATINGS METHODOLOGY

The principal methodology used in these ratings was "Moody's Approach to Rating Covered Bonds" published in December 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's either did not receive or take into account one or more third-party due diligence assessment(s) regarding the underlying assets or financial instruments (the "Due Diligence Assessment(s)") in this credit rating action.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no amendment resulting from that disclosure.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Simba George Murahwi
Associate Analyst
Structured Finance Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Richard Hunt
VP - Sr Credit Officer/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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