Announcement follows rating actions on SNS Bank N.V. and ABN AMRO Bank N.V.
London, 15 June 2012 -- Moody's Investors Service has today downgraded the ratings of covered
bonds issued under the ABN AMRO Bouwfonds Nederlandse Gemeenten and SNS
Bank N.V. programmes.
These rating actions were prompted by Moody's decision on 15 June 2012
to downgrade the senior debt ratings of ABN AMRO Bank N.V.
and SNS Bank N.V., which support the relevant covered
bond programmes.
Please click this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF289114
for the list of affected covered bond ratings. This list is an
integral part of this Press Release and identifies each affected issuer.
For additional information on covered bond ratings, please refer
to the webpage containing Moody's related announcements http://www.moodys.com/eusovereign.
RATINGS RATIONALE
Today's covered bond downgrades follow Moody's rating actions on the relevant
issuers' senior unsecured ratings.
The covered bonds of SNS Bank N.V. programme have been downgraded
under Moody's Timely Payment Indicator (TPI) framework as a result of
the impact of the downgrade of the issuer's senior unsecured rating.
Based on the current TPI of "Probable", and with an
issuer senior unsecured rating of Baa2, the covered bonds rating
has been capped at Aa2.
With respect to ABN AMRO Bouwfonds Nederlandse Gemeenten N.V.
Secured Debt Issuance Programme, the rating of the covered bonds
has been downgraded in line with the senior unsecured rating of ABN AMRO
Bank N.V. Moody's notes that while this programme is backed
by Dutch mortgage collateral, no credit is given to the collateral
given the limited amount of information available on the cover pool.Therefore,
the downgrade of ABN AMRO Bank N.V.'s senior unsecured
ratings to A2 from Aa3 was the driver for the downgrade of these covered
bonds
The performance of the underlying collateral was not a factor in the downgrade
of the covered bonds issued under either of the two programmes.
For more information on the rating actions taken by Moody's Financial
Institutions Group, see the press release "Moody's downgrades Dutch
banking groups; most outlooks now stable" published on 15 June 2012.
The rating actions on the issuers' ratings conclude the review for downgrade
of Dutch banks, initiated on 15 February 2012 (see "Moody's Reviews
Ratings for European Banks"). That review was part of Moody's wider
review of European financial institutions, driven in part by (i)
the difficult European operating environment caused by the prolonged euro
area crisis; and (ii) the deteriorating creditworthiness of certain
euro area sovereigns.
Covered bond ratings are determined after applying a two-step process:
an expected loss analysis and a TPI framework analysis.
Please click the link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF289114
for detailed information on expected loss and TPI .
(1) Expected Loss Method
Moody's expected loss analysis is negatively affected by the downgrade
of the issuer's rating. As the credit strength of the issuer is
incorporated into Moody's expected loss methodology, any downgrade
of the issuer's ratings will increase the expected loss on the covered
bonds. However, Moody's notes that issuers may be able to
offset any deterioration in the expected loss analysis if sufficient collateral
is held in the cover pool.
(2) TPI Framework
The TPI framework limits the covered bond ratings to a certain number
of notches above the senior debt ratings of the banks supporting the covered
bonds. For each combination of the issuer's senior debt rating
and the assigned TPI -- Moody's TPI table indicates where
the covered bond rating is likely to be positioned. However,
Moody's highlights that there are additional factors that might influence
the final positioning of the rating under the application of TPIs framework,
in particular for sub-investment-grade-rated issuers.
The ratings assigned by Moody's address the expected loss posed to investors.
Moody's ratings address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed, but may have
a significant effect on yield to investors. Covered bond ratings
are determined after applying a two-step process: an expected
loss analysis and a TPI framework analysis.
KEY RATING ASSUMPTIONS/FACTORS
- EXPECTED LOSS: Moody's determines a rating based on the
expected loss on the bond. The primary model used is Moody's Covered
Bond Model (COBOL), which determines expected loss as (i) a function
of the issuer's probability of default (measured by the issuer's rating);
and (ii) the stressed losses on the cover pool assets following issuer
default.
- TPI FRAMEWORK: Moody's assigns a TPI, which indicates
the likelihood that timely payments will be made to covered bondholders
following issuer default. The effect of the TPI framework is to
limit the covered bond rating to a certain number of notches above the
issuer's rating.
Please click the link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF289114
for detailed information on over-collateralisation, expected
loss and TPI.
SENSITIVITY ANALYSIS
The robustness of a covered bond rating largely depends on the issuer's
credit strength.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances, such as (i) a sovereign downgrade
that negatively affects both the issuer's senior unsecured rating and
the TPI; (ii) a multiple-notch downgrade of the issuer;
or (iii) a material reduction of the value of the cover pool.
As the euro area crisis continues, the covered bond ratings remain
exposed to the uncertainties of credit conditions in the general economy.
The deteriorating creditworthiness of euro area sovereigns as well as
the weakening credit profile of the global banking sector could negatively
affect the ratings of covered bonds. For more information please
refer to the Rating Implementation Guidance published on 13 February 2012
"How Sovereign Credit Quality May Affect Other Ratings". Please
also refer to the recent rating actions on banks published on 15 February
2012, (please see "Moody's Reviews Ratings for European Banks" and
"Moody's Reviews Ratings for Banks and Securities Firms with Global Capital
Markets Operations" for more information).
The principal methodology used in these ratings was "Moody's Approach
to Rating Covered Bonds", published in March 2010. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology.
REGULATORY DISCLOSURES
Please click this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF289114
for the list of affected covered bond ratings. This list is an
integral part of this Press Release and provides, for each of the
credit ratings covered, Moody's disclosures on the following
items:
Releasing Office
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
The ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Information sources used to prepare each of the ratings are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings 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.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entities or their related third parties within
the two years preceding the credit rating action. Please see the
special report "Ancillary or other permissible services provided
to entities rated by MIS's EU credit rating agencies" on the
ratings disclosure page on our website www.moodys.com for
further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
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.
Alexis Michon
Vice President - Senior Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
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 takes actions on covered bonds issued under two Dutch programmes
