New Counterparty Risk Assessments affect the covered bond anchors
Frankfurt am Main, June 23, 2015 -- Moody's Investors Service has today upgraded the ratings of five Italian
covered bond programmes and confirmed the rating of one Italian covered
bond programme following the assignment of Counterparty Risk (CR) Assessments
to the issuing entities.
Please click on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF411629
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.
Today's rating actions conclude the review of the covered bonds' ratings
that Moody's initiated on 17 March 2015. For the covered bonds
of Banca Monte dei Paschi di Siena S.p.A (deposits/senior
unsecured B3, negative, baseline credit assessment caa2),
the review was initiated on 4 November 2014 and extended on 28 April 2015.
RATINGS RATIONALE
Today's rating actions on the covered bonds follow Moody's assignment
of a new CR Assessment for the underlying institution supporting the covered
bonds (see http://www.moodys.com/viewresearchdoc.aspx?docid=PR_328278).
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.
Except for the public-sector covered bonds of Intesa Sanpaolo S.p.A.
(deposits/senior unsecured Baa1, stable, baseline credit assessment
baa3), all affected covered bond ratings are at the maximum achievable
rating based on their CB anchor and timely payment indicator (TPI) of
"Probable", see TPI framework below, also considering
the Aa2 country ceiling for Italy. The A1 ratings of Intesa Sanpaolo's
public-sector covered bonds are constrained by the level of committed
over-collateralisation (OC).
Moody's confirmed the Baa3 ratings of Banca Monte dei Paschi di
Siena S.p.A's covered bonds. The rating confirmation
is based on the newly assigned CR Assessment of B2(cr), which raises
the CB Anchor for these covered bonds by two notches compared to the previous
CB Anchor derived from the senior unsecured rating.
Moody's will continue to monitor the development regarding Banca
Monte dei Paschi di Siena S.p.A's proposal in respect
of the conversion of the soft-bullet covered bonds into conditional
pass-through covered bonds. Moody's will only reflect
the potential impact of this proposal on the ratings of the covered bonds
after the noteholder meeting has decided on the proposal and after the
proposal has been implemented and becomes effective. Please see
http://www.moodys.com/viewresearchdoc.aspx?docid=PR_323143
for details.
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 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
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 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:
For identification of which credit ratings have payors that have or have
not paid Moody's for services other than determining a credit rating
in the most recently ended fiscal year, please see the detailed
list under the following link: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF411629.
The list is an integral part of this press release.
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.
Martin Lenhard
Vice President - Senior Analyst
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
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 Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's upgrades five Italian covered bond ratings; one rating confirmed
