London, 24 October 2018 -- Moody's Investors Service ("Moody's") has today
downgraded the ratings of 9 Italian covered bond programmes and placed
on review for downgrade the ratings of Intesa Sanpaolo Spa - Public-Sector
Covered Bonds.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF475309
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
Today's rating action on various Italian covered bond programmes follows
Moody's recent decision to lower the Government of Italy's (Italy) local-currency
bond ceiling to Aa3 from Aa2, which in turn follows the downgrade
of the Government of Italy's issuer ratings to Baa3 with a stable outlook
from Baa2 on 19 October 2018. As a result of this downgrade,
the Italian covered bond ratings are now capped at Italy's local currency
bond ceiling of Aa3.
For more details on the rationale for the sovereign rating change,
please refer to the press release: http://www.moodys.com/viewresearchdoc.aspx?docid=PR_390302.
Following the downgrade of Italy's sovereign rating, the Counterparty
Risk (CR) Assessments of 3 covered bond issuers were also downgraded.
For more details on the rationale for the bank rating downgrades,
please refer to the press release http://www.moodys.com/viewresearchdoc.aspx?docid=PR_390365.
For BPER Banca S.p.A. - Mortgage Covered Bonds
1, BPER Banca S.p.A. - Mortgage Covered
Bonds 2 (CPT), Credit Agricole Cariparma S.p.A.-
Mortgage Covered Bonds, Credito Emiliano SpA - Mortgage Covered
Bonds, Deutsche Bank SpA - Mortgage Covered Bonds,
Intesa Sanpaolo Spa - Mortgage Covered Bonds, UniCredit S.p.A
- Mortgage Covered Bonds 2 (CPT), UniCredit SpA -
Mortgage Covered Bonds and Unione di Banche Italiane S.p.A.
- Mortgage Covered Bonds the Italian country bond ceiling constrains
the ratings at Aa3. All covered bond ratings have OC consistent
with their new rating level.
Moody's has placed the A1 ratings for Intesa Sanpaolo Spa - Public-Sector
Covered Bonds on review for downgrade. During the review,
Moody's will consider the level of over-collateralisation (OC),
that is expected for the programme.
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 all the Italian covered bonds is the CR assessment plus
one notch. The CR assessment reflects an issuer's ability
to avoid defaulting on certain senior bank operating obligations and contractual
commitments, including covered bonds. Moody's may use
a CB anchor of CR assessment plus one notch in the European Union or otherwise
where an operational resolution regime is particularly likely to ensure
continuity of covered bond payments.
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.
Please click the link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF475309
for detailed information on over-collateralisation, expected
loss and TPI.
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 Moody's most recent modelling (based on data,
as of the date of the most recent Performance Overviews).
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.
Factors that would lead to an upgrade or downgrade of the ratings:
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.
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.
RATING 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
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF475309
for the List of Affected Credit 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 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 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
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.
Falconi Francesca
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Jose de Leon
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Miguel Lopez Patron
Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454
