New Counterparty Risk Assessment affects the covered bond anchors
NOTE: On November 18, 2015, the press release was corrected as follows: In the seventh and eighth paragraphs in the REGULATORY DISCLOSURES section added reference to entity Banco CEISS, S.A. Accordingly, these paragraphs have been replaced with the following: “The ratings of rated entities Abanca Corporacion Bancaria S.A. and Banco CEISS, S.A. were not initiated or not maintained at the request of these rated entities.” and “Moody’s considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody’s. On this basis, the rated entities Abanca Corporacion Bancaria S.A., Banco CEISS, S.A. or their agents are considered to be participating entities. These rated entities or their agents generally provide Moody’s with information for their ratings process.” Revised release follows:
NOTE:On September 07, 2015, the press release was corrected as follows: The following changes were made to the list of affected credit ratings referenced in the second
paragraph of the release: the CB Rating symbol A1 has been colour coded for Bankia S.A. - Cedulas Hipotecarias.
The fifth and seventh paragraph in the REGULATORY DISCLOSURES section have been replaced with the following: “The ratings
of rated entity Bankia S.A. were not initiated or not maintained at the request of the rated entity.” and “The ratings of rated entity
Abanca Corporacion Bancaria S.A. were not initiated or not maintained at the request of the rated entity.”, respectively.
The fifth and sixth paragraphs have been colour coded.
The following language was added to eighth paragraph in the REGULATORY DISCLOSURES section: “Moody’s considers a rated
entity or its agent(s) to be participating when it maintains an overall relationship with Moody’s. On this basis, the rated entity Abanca
Corporacion Bancaria S.A. or its agent(s) is considered to be a participating entity. The rated entity or its agent(s) generally provides
Moody’s with information for the purposes of its ratings process.” Revised release follows.
Madrid, June 18, 2015 -- Moody's Investors Service has today upgraded the ratings of 20 Spanish
covered bond programmes following the assignment of Counterparty Risk
(CR) Assessments to the issuing entities.
Please click on this link, http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF410225,
for the list of affected credit ratings. The list is an integral
part of this press release. For a list of the disclosures on each
of the credit ratings covered, please see the ratings rationale
section of this press release.
Today's upgrade concludes the review of the covered bonds' ratings that
Moody's initiated on 17 March 2015 (see "Moody's reviews for upgrade 69
European covered bond ratings").
RATINGS RATIONALE
Today's rating action on the covered bonds follows Moody's assignment
of a new CR Assessment for the underlying institution supporting the covered
bonds (see "Moody's concludes reviews on 20 Spanish banks' ratings").
The CB anchor for these programmes is the CR Assessment plus one notch.
With the assignment of the CR Assessment, the CB anchor of the affected
programmes is now higher than before.
Please refer to http://www.moodys.com/viewresearchdoc.aspx?docid=PR_327965
KEY RATING ASSUMPTIONS/FACTORS
Moody's determines covered bond ratings using a two-step process:
an expected loss analysis and a Timely Payment Indicator (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 the programmes 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 the 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 for each programme is an estimate of the losses
that Moody's currently models if a CB anchor event occurs. Moody's
splits cover pool losses between market risks and collateral risks.
Market risks measure losses stemming from refinancing risks and risks
related to interest-rate and currency mismatches (these losses
may also include certain legal risks). Collateral risks measure
losses resulting directly from cover pool assets' credit quality.
Moody's derives the collateral risk from the collateral score.
TPI FRAMEWORK: Moody's assigns a 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 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
downgrading 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 March 2015. 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.
The ratings of rated entity Bankia S.A. were not initiated or not maintained at the request of the rated entity.
The ratings of rated entity Bankia S.A. or related third
parties did not participate in the rating process. Moody's
was not provided, for purposes of the rating, access to books,
records and other relevant internal documents of the rated entity or related
third party.
The ratings of rated entities Abanca Corporacion Bancaria S.A. and Banco CEISS, S.A. were not initiated or not maintained at the request of these rated entities.
Moody’s considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody’s. On this basis, the rated entities Abanca Corporacion Bancaria S.A., Banco CEISS, S.A. or their agents are considered to be participating entities. These rated entities or their agents generally provide Moody’s with information for their ratings process.
The following information supplements Disclosure 10 ("Information
Relating to Conflicts of Interest as required by Paragraph (a)(1)(ii)(J)
of SEC Rule 17g-7") in the regulatory disclosures made at
the ratings tab on the issuer/entity page on www.moodys.com
for each credit rating as indicated:
Moody's was not paid for services other than determining a credit
rating in the most recently ended fiscal year by the person(s) that paid
Moody's to determine this credit rating.
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 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.
Tomas Rodriguez-Vigil
Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
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 Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's upgrades 20 Spanish covered bond ratings
