Madrid, March 12, 2021 -- Moody's Investors Service ("Moody's") has today upgraded to A3 from Baa1
the rating of the covered bond issued by National Bank of Greece S.A.
(NBG or the issuer) (deposits Caa1 stable, adjusted baseline credit
assessment caa1, counterparty risk (CR) assessment B1(cr)) under
its Mortgage Covered Bond 2 Programme.
RATINGS RATIONALE
Today's rating upgrade follows amendments to the programme documents whereby
the issuer has replaced the definition of the "amortization test"
by the former definition of the "enhanced amortisation test".
Prior to this amendment, following an issuer event, a breach
of the amortization test would have led to an acceleration of the covered
bonds. A breach of the amortization test was defined as the reduction
of the nominal value of the assets below the nominal value of the covered
bonds outstanding; whereby the nominal value of the assets could
be reduced by those assets becoming delinquent. Thus, a high
level of arrears could have triggered a breach. While refinancing
risk was overall low due to the conditional pass-through mechanism
of the covered bonds, the risk of acceleration meant it was still
material in the programme. The removal of the amortization test
definition therefore mitigates the refinancing risk further. As
part of the new amendments, a breach of the amortisation test following
an issuer event will lead now to all covered bonds becoming pass-through
instead of accelerating.
As a result, Moody's has raised the Timely Payment Indicator
(TPI) of this programme to "Probable-High" from "Probable".
The over-collateralisation (OC) in the programme is consistent
with a covered bond rating of A3, the highest rating now achievable
under Moody's 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 this programme is CR assessment plus 1 notch.
The cover pool losses for this programme are 30.5%.
This is an estimate of the losses Moody's currently models following a
CB anchor event. Moody's splits cover pool losses between
market risk of 18% and collateral risk of 12.5%.
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 cover pool assets' credit quality. Moody's
derives collateral risk from the collateral score, which for this
programme is currently 18.7%.
The over-collateralisation in the cover pool is 665.1%,
of which the issuer provides 22% on a "committed" basis.
Under Moody's COBOL model, the minimum OC consistent with
the A3 rating is 25%. 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 "Covered Bonds Sector Update",
published quarterly.
TPI FRAMEWORK: Moody's assigns a TPI, which is our assessment
of the likelihood of timely payment of interest and principal to covered
bondholders following a CB anchor event. TPIs are assessed as Very
High, High, Probable-High, Probable, Improbable
or Very Improbable. The TPI framework limits the covered bond rating
to a certain number of notches above the CB anchor.
For National Bank of Greece S. A. - Mortgage Covered
Bonds 2, Moody's has assigned a TPI of Probable-High.
RATING METHODOLOGY
The principal methodology used in this rating was "Moody's
Approach to Rating Covered Bonds" published in October 2020 and
available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1234823.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
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.
Based on the current TPI of "Probable-High",
the TPI Leeway for this programme is 0 notches. This implies that
Moody's might downgrade the covered bonds because of a TPI cap if
it lowers the CB anchor by 1 notch all other variables being equal.
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.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
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.
Miguel Lopez Patron
Asst Vice President - 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
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
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
