EUR3.542 billion of notes affected.
London, 31 October 2014 -- Moody's Investors Service has taken the following rating actions:
- Mortgage covered bonds (residential) issued by Banca Carige S.p.A.:
Ba1 placed on review for downgrade
- Mortgage covered bonds 2 (commercial) issued by Banca Carige
S.p.A.: Baa3 placed on review for downgrade
These review placements follow Moody's decision to place on review for
downgrade, the issuer rating of Banca Carige S.p.A.
(Caa1, deposits, on review for downgrade; bank financial
strength rating E/baseline credit assessment caa3, on review for
downgrade).
RATINGS RATIONALE
Today's rating actions are prompted by the review for downgrade of the
issuer ratings on October 30, 2014. For additional details, please see
https://www.moodys.com/research/Moodys-takes-rating-actions-on-six-EU-banks-post-ECB--PR_311330
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 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 measures losses resulting directly from the cover pool
assets' credit quality. Moody's derives collateral
risk from the collateral score.
The CB anchor for Mortgage covered bonds (residential) and for Mortgage
covered bonds 2 (commercial) is SUR plus 1 given the debt ratio is between
5 and 10%.
The cover pool losses of Mortgage covered bonds (residential) 21.3%,
with market risk of 15.9% and collateral risk of 5.4%.
The collateral score for this programme is currently 8.1%.
The over-collateralisation in this cover pool is 67.5%,
of which the issuer provides 22% on a "committed" basis.
The minimum OC level that is consistent with the current Ba1 rating target
is 3%. These numbers show that Moody's is not relying
on "uncommitted" OC in its expected loss analysis.
The cover pool losses of Mortgage covered bonds 2 (commercial) are 38.9%,
with market risk of 15.2% and collateral risk of 23.7
%. The collateral score for this programme is currently
35.3%. The over-collateralisation in this
cover pool is 74.1 %, of which the issuer provides
32% on a "committed" basis. The minimum OC level
that is consistent with the current Baa3 rating target is 34%.
These numbers show that Moody's is relying on "uncommitted"
OC in its expected loss analysis.
For further details on cover pool losses, collateral risk,
market risk, collateral score and TPI Leeway across covered bond
programmes rated by Moody's please refer to "Moody's Global Covered Bonds
Monitoring Overview", published quarterly. All numbers in
this section are based on the most recent Performance Overviews (based
on data, as of 30/06/2014).
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.
For Mortgage covered bonds (residential), Moody's has assigned
a TPI of Probable. For Mortgage covered bonds 2 (commercial),
Moody's has assigned a TPI of Probable-High.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
The CB anchor is the main determinant of a covered bond programme's rating
robustness. A change in the level of the CB anchor could lead to
an upgrade or 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.
The TPI assigned to Mortgage covered bonds (residential) is "Probable".
The TPI Leeway for Mortgage covered bonds (residential) is limited,
and thus any reduction of the CB anchor may lead to a downgrade of the
covered bonds.
The TPI assigned to Mortgage covered bonds 2 (commercial) is "Probable-High".
The TPI Leeway for Mortgage covered bonds 2 (commercial) is limited,
and thus any reduction of the CB anchor may lead to a downgrade of the
covered bonds.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances, such as (1) a sovereign downgrade
negatively affecting both 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.
RATING METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Covered Bonds" published in March 2014.
Please see the Credit Policy 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 did not use any stress scenario simulations in its analysis.
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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
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.
Volker Gulde
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's reviews Banca Carige's covered bonds for downgrade
