TEXT-S&P says creditwatch placements on covered bond ratings likely

Mon Nov 26, 2012 12:26pm EST

Nov 26 - Standard & Poor's Ratings Services said today that as of Dec. 10,
it may place on CreditWatch with negative implications the ratings on certain
covered bond programs if it believes they are unlikely to meet its criteria for
assessing counterparty risk by Jan. 11, 2013.

Standard & Poor's published its updated criteria for assessing counterparty 
and supporting party risk in covered bonds (collectively "counterparty risk") 
on May 31, 2012 (see "Covered Bonds Counterparty And Supporting Obligations 
Methodology And Assumptions," and "Counterparty Risk Framework Methodology And 
Assumptions"). On publishing the criteria, we had stated that on the effective 
date, on July 12, 2012, we would likely place several covered bond ratings on 
CreditWatch negative. We did not place on CreditWatch covered bond programs 
that were not affected by the new criteria or those whose issuers had 
submitted action plans to enable the covered bond programs to meet the updated 
criteria by the transition date, Jan. 11, 2013. 

We have been in regular contact with the issuers as we monitor their progress 
in bringing the exposure to relevant counterparties in line with our criteria.

In our view, it is becoming less likely that some of the issuers will 
implement the planned remedies to fully mitigate counterparty risk by Jan 11, 
2013. This is because progress on implementing some of the action plans has 
been slower than anticipated. Furthermore, given the current delays in 
implementing certain action plans, we are also less likely to have completed 
our review by the transition date if we only receive the final documentation 
shortly before then. We might therefore place our issue ratings on several 
covered bond programs on CreditWatch in December. 

We might also place on CreditWatch our ratings on those programs for which we 
need to update our rating opinion to comply with European regulations 
(REGULATION (EC) No 1060/2009). For those programs we need to update our 
opinion based on the current criteria and will incorporate any progress made 
to implement the counterparty criteria as of the review date. 

We will comment on the potential magnitude of possible rating changes if we 
put any of the ratings on CreditWatch.


RELATED CRITERIA AND RESEARCH
Related criteria:
     -- Covered bond Ratings Framework: Methodology And Assumptions, June 26, 
2012
     -- Assessing Asset-Liability Mismatch Risk In Covered Bonds: Revised 
Methodology And Assumptions For Target Asset Spreads, April 24, 2012
     -- Covered Bonds Counterparty And Supporting Obligations Methodology And 
Assumptions, May 31, 2012
     -- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012
     -- Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology 
And Assumptions, June 14, 2011
     -- Principles Of Credit Ratings, Feb. 16, 2011
     -- Revised Methodology And Assumptions For Assessing Asset-Liability 
Mismatch Risk In Covered Bonds, Dec. 16, 2009 
     -- General Criteria: Standard & Poor's To Explicitly Recognize Credit 
Stability As An Important Rating Factor, Oct. 15, 2008
     -- A Listing Of S&P's New Actions Aimed At Strengthening The Ratings 
Process, Feb. 7, 2008
     -- European Legal Criteria for Structured Finance Transactions, March 23, 
2005

Related research:
     -- Rating On Deutsche Pfandbriefbank's Public-Sector Covered Bonds Placed 
On CreditWatch Negative, Nov. 7, 2012
     -- Various Rating Actions Taken On Eight European Covered Bond Programs 
Following Counterparty Criteria Update, July 12, 2012

Other research:
     -- REGULATION (EC) No 1060/2009 OF THE EUROPEAN PARLIAMENT AND OF THE 
COUNCIL, European Commission, Sept. 16, 2009 


The report is available to subscribers of RatingsDirect on the Global Credit 
Portal at www.globalcreditportal.com.  If you are not a RatingsDirect 
subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 
or sending an e-mail to research_request@standardandpoors.com. Ratings 
information can also be found on Standard & Poor's public Web site by using 
the Ratings search box located in the left column at www.standardandpoors.com.
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