Fitch Affirms Belgian Pandbrieven on Criteria Amendments; Revises Belfius' Pandbrieven Outlook

Fri Mar 28, 2014 12:42pm EDT

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(The following statement was released by the rating agency) PARIS, March 28 (Fitch) Fitch Ratings has affirmed the ratings of three Belgian pandbrieven programmes. These rating actions follow the implementation of the agency's revised Covered Bonds Rating Criteria dated 10 March 2014 to programmes issued by Belgian banks. The rating actions also take into account relevant Negative Outlooks on banks' Long-term Issuer Default Ratings (IDR) announced by Fitch on 26 March 2014 (see Fitch Revises Outlooks on 18 EU Commercial Banks to Negative on Weakening Support). As part of its updated covered bonds analysis, the agency has assigned IDR uplift to each programme, where applicable. KEY RATING DRIVERS The rating of Belfius Bank SA/NV's mortgage pandbrieven is affirmed at 'AAA', based on the bank's IDR of 'A-', a newly assigned IDR uplift of '1', an unchanged D-Cap of '4' (moderate discontinuity risk) and higher overcollateralisation (OC) taken into account by the agency than the breakeven OC for the rating. The Outlook on the 'AAA' rating of Belfius Bank SA/NV's mortgage pandbrieven has been revised to Negative from Stable to reflect a similar action on Belfius Bank's IDR of 'A-'. It also reflects Fitch's view that a potential downgrade of the IDR may not be entirely compensated by the IDR uplift of '1'. The rating of ING Belgium's mortgage pandbrieven is affirmed at 'AAA'/Stable, based on the bank's IDR of 'A+', a newly assigned IDR uplift of '1', an unchanged D-Cap of '4' (moderate discontinuity risk) and higher OC taken into account by the agency than the breakeven OC for the rating. The rating of KBC Bank's mortgage pandbrieven is affirmed at 'AAA'/Stable, based on the bank's IDR of 'A-', a newly assigned IDR uplift of '1', an unchanged D-Cap of '4' (moderate discontinuity risk) and higher OC taken into account by the agency than the breakeven OC for the rating. The IDR uplift expresses Fitch's judgement regarding the degree of protection in the event of a bank's resolution that would be available to prevent the source of covered bonds payments switching from the issuer to the cover pool. It is derived from the following factors: Fitch's opinion regarding the relative ease and motivations for resolution methods other than liquidation, the importance of covered bonds to the financial markets in a given jurisdiction and the extent of buffer offered by senior unsecured debt. Fitch's view on the use of resolution methods other than liquidation contributes to the IDR uplift assigned to the mortgage pandbrieven of Belfius Bank SA/NV, ING Belgium and KBC Bank based on their large size in their domestic market. Belgium is not deemed by Fitch to be a covered bonds-intensive jurisdiction and as such, this does not contribute to the IDR uplift of the Pandbrieven rated by Fitch. Fitch estimates the long-term non-retail placed senior unsecured debt of Belfius Bank SA/NV, ING Belgium and KBC Bank do not exceed 5% of total adjusted assets, based on the latest available financial information. As such, the covered bond programmes of these banks do not benefit from the potential uplift factor of protection from the level of senior unsecured debt of the banks. RATING SENSITIVITIES Belfius Bank SA/NV, mortgage pandbrieven's 'AAA' rating is vulnerable to downgrade if any of the following occurs: (i) Belfius Bank's IDR is downgraded by two notches to 'BBB' or more; (ii) the D-Cap is revised down to '2' (high discontinuity risk) or lower; (iii) the level of OC that Fitch takes into account in its analysis falls below Fitch's 'AAA' breakeven OC of 25.5%. ING Belgium, mortgage pandbrieven's 'AAA' rating is vulnerable to downgrade if any of the following occurs: (i) the IDR of ING Belgium is downgraded by four notches to 'BBB' or more; (ii) the D-Cap is revised down to '0' (full discontinuity risk); (iii) the level of OC that Fitch takes into account in its analysis falls below Fitch's 'AAA' breakeven OC of 43%. KBC Bank, mortgage pandbrieven's 'AAA' rating is vulnerable to downgrade if any of the following occurs: (i) KBC Bank's IDR is downgraded by two notches to 'BBB' or more; (ii) the D-Cap is revised down to '2' (high discontinuity risk) or lower; or (iii) the level of OC that Fitch takes into account in its analysis falls below Fitch's 'AAA' breakeven OC of 24.5%. Contact: Primary Analyst Will Rossiter Director +33 (0)1 44 29 91 47 Fitch France S.A.S. 60 rue de Monceau 75008 Paris Secondary Analyst Francois Le Roy Associate Director +33 (0)1 44 29 91 75 Committee Chairperson Helene Heberlein Managing Director +33 (0)1 44 29 91 40 Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email: christian.giesen@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, Covered Bonds Rating Criteria, dated 10 March 2014, Counterparty Criteria for Structured Finance and Covered Bonds, dated 13 May 2013, Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum, dated 13 May 2013, Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds, dated 23 January 2014, EMEA RMBS Master Rating Criteria, dated 6 June 2013, EMEA Criteria Addendum - Belgium, dated 21 June 2013, Covered Bonds Rating Criteria - Mortgage Liquidity and Refinancing Stress Addendum, 4 February 2014, are available on www.fitchratings.com. Applicable Criteria and Related Research: Covered Bonds Rating Criteria here Covered Bonds Rating Criteria – Mortgage Liquidity and Refinancing Stress Addendum here Counterparty Criteria for Structured Finance and Covered Bonds here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum here Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds here EMEA RMBS Master Rating Criteria here EMEA Criteria Addendum - Belgium here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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