TEXT-S&P puts rtgs on 6 European covered bond programs on watch neg
OVERVIEW -- On July 12, 2012, our updated criteria for assessing counterparty risk in covered bonds became effective, and issuers had six months to meet the updated criteria. -- We initially considered that the action plans provided by six issuers for their covered bond programs would enable the programs to meet the updated criteria by the transition date, on Jan. 11, 2013. -- We now believe that there is an increased likelihood that these programs won't fully meet the criteria by the end of the transition period. -- Based on our analysis under the updated criteria, we have placed on CreditWatch negative our ratings on six European covered bond programs. -- We placed on CreditWatch negative our short-term ratings on two of the covered bond programs. -- We intend to resolve these CreditWatch placements by either affirming or lowering the ratings on or before Jan. 11, 2013. FRANKFURT (Standard & Poor's) Dec. 14, 2012--Standard & Poor's Ratings Services today placed its ratings on six European covered bond programs and related series on CreditWatch with negative implications (see list below). The rating actions follow our review of the covered bond programs' exposure to counterparty risk and the current progress made by issuers to mitigate risks in line with our criteria. On May 31, 2012, we updated our methodology and assumptions for assessing counterparty and supporting party risk in covered bonds (collectively "counterparty risk"). We believe that there is an increased likelihood that these six covered bond programs will not fully meet the criteria by Jan. 11, 2013 (see "Covered Bonds Counterparty And Supporting Obligations Methodology And Assumptions," and "Counterparty Risk Framework Methodology And Assumptions"). We have been in regular contact with the issuers to monitor progress in addressing the risks identified as well as effectively setting up and implementing the action plans submitted in order to meet the rating criteria by Jan. 11, 2013, the end of the transition period. In some cases, we have assessed whether available overcollateralization would sufficiently mitigate the counterparty related risks identified. Based on the information received from the issuers, we are currently of the opinion that bank account and commingling risk for five of these programs is currently not or not fully covered in line with our criteria. In addition, we believe one issuer did not yet adequately address derivative-related risks for its program. We will resolve the CreditWatch placements following a final review of program-specific details, including further progress made in mitigating identified risks. As a result, we will either affirm or lower the ratings on these six covered bond programs on or before the Jan. 11, 2013, transition date. We may place on CreditWatch negative the ratings on other covered bond programs if we believe they are unlikely to meet our criteria for assessing counterparty risk by Jan. 11, 2013. Based on the current available information and all else being equal, we could potentially downgrade the programs by one or more notches. In particular: GERMAN COVERED BOND PROGRAMS We could lower our ratings on Deutsche Postbank AG's Hypothekenpfandbriefe by up to two notches to 'AA', and on its DSL Briefe by one notch to 'AA+'. We could downgrade Hypothekenbank Frankfurt AG's Hypothekenpfandbriefe and Offentliche Pfandbriefe by up to six notches. In that case, our ratings on both programs would be capped at the level of the issuer credit rating--'A-'--if no further mitigating measures are implemented. LUXEMBURG COVERED BONDS We could downgrade Erste Europaische Pfandbrief- und Kommunalkreditbank AG's Lettre de Gage Publiques by up to four notches to 'A+'. PORTUGUESE COVERED BONDS We could lower our ratings on Banco Santander Totta S.A.'s Obrigacoes hipotecarias by up to two notches if the issuer does not address derivative risks in line with our criteria. RELATED CRITERIA AND RESEARCH -- Covered Bond Ratings Framework: Methodology And Assumptions, June 26, 2012 -- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012 -- Covered Bonds Counterparty And Supporting Obligations Methodology And Assumptions, May 31, 2012 -- Use Of CreditWatch And Outlooks, Sept. 14, 2009European Legal Criteria For Structured Finance Transactions, Aug. 28, 2008Understanding Standard & Poor's Rating Definitions, June 3, 2009 -- Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 -- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011 -- European Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, March 14, 2012 -- What Factors Do We Consider When Analyzing Commingling And Account Bank Risk In Covered Bonds?,Nov. 26, 2012 -- Issuers' Delays In Meeting Updated Covered Bond Criteria Might Lead To Several CreditWatch Placements, Nov. 26, 2012 RATINGS LIST Ratings Placed On CreditWatch Negative To From Deutsche Postbank AG Long-Term Rating: AAA/Watch Neg AAA/Stable Short-Term Rating: A-1+ A-1+ Germany: Mortgage Covered Bonds (Hypothekenpfandbriefe) Deutsche Postbank AG AAA/Watch Neg AAA/Stable Germany: Public-Sector Covered Bonds (DSL Briefe) Hypothekenbank Frankfurt AG Long-Term Rating: AAA/Watch Neg AAA/Stable Short-Term Rating: A-1+/Watch Neg A-1+ Germany: Mortgage Covered Bonds (Hypothekenpfandbriefe) Hypothekenbank Frankfurt AG Long-Term Rating: AAA/Watch Neg AAA/Negative Short-Term Rating: A-1+/Watch Neg A-1+ Germany: Public-Sector Covered Bonds (Offentliche Pfandbriefe) Erste Europaeische Pfandbrief- und Kommunalkreditbank AG AAA/Watch Neg AAA/Negative Luxembourg: Public-Sector Covered Bonds (Lettres de Gage Publiques) Banco Santander Totta S.A. BBB/Watch Neg BBB/Negative Portugal: Mortgage Covered Bonds (Obrigacoes Hipotecarias)
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