(The following statement was released by the rating agency)
FRANKFURT/LONDON, April 14 (Fitch) Fitch Ratings has affirmed
Credit Suisse AG
and UBS AG's Swiss covered bonds programmes at 'AAA' with a
The rating actions follow the implementation of the agency's
Bonds Rating Criteria dated 10 March 2014 to programmes issued
by Swiss banks.
As part of its updated covered bonds analysis, the agency has
Default Rating (IDR) uplift to each programme, where applicable.
The Swiss FINMA
Banking Insolvency Ordinance allows for the conversion of debt
equity capital but excludes secured claims to the extent that
they are secured.
Fitch has been able to confirm with the regulator that covered
bonds issued by
Swiss institutions, independent of the issuer's structure (i.e.
under the Special Purpose Vehicle template), are exempt from
The rating actions also take into account the Stable Outlooks on
AG & UBS AG's IDRs (see "Fitch Takes Rating Action on Global
Universal Banks Following Peer Review" dated 26 March 2014 at
KEY RATING DRIVERS
The affirmation of Credit Suisse AG's mortgage covered bonds at
based on the bank's IDR of 'A'/Stable, a newly assigned IDR
uplift of 2, an
unchanged D-Cap of 3 (moderate high discontinuity risk) and the
(AP) taken into account by the agency providing more protection
The affirmation of UBS AG's mortgage covered bonds at
'AAA'/Stable is based on
the bank's IDR of 'A'/Stable, a newly assigned IDR uplift of 2,
D-Cap of 3 (moderate high discontinuity risk) and the AP taken
into account by
the agency providing more protection than the breakeven AP.
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
the buffer offered by senior unsecured debt.
Fitch's view on the use of resolution methods other than
to the IDR uplift assigned to the programmes of Credit Suisse AG
and UBS AG,
which benefit from Global Systemically Important Bank status.
Switzerland is deemed by Fitch not to be a covered bonds
and thus is not contributing to the IDR uplift for Swiss
bonds rated by Fitch.
Protection from the level of senior unsecured debt is reflected
in the IDR
uplift assigned to both Credit Suisse AG and UBS AG. This is
based on Fitch's
estimate of long-term non-retail placed senior unsecured debt
exceeding 5% of
total adjusted assets on the latest available financial
The 'AAA' rating of Credit Suisse AG's mortgage covered bonds
vulnerable to a downgrade if any of the following occurs: (i)
the IDR is
downgraded by three or more notches to 'BBB' or below; or (ii)
the D-Cap is
lowered by three categories to 0 (full discontinuity); or (iii)
the AP that
Fitch considers in its analysis increased above Fitch's 'AAA'
breakeven level of
The 'AAA' rating of UBS AG's mortgage covered bonds would be
vulnerable to a
downgrade if any of the following occurs: (i) the IDR is
downgraded by three or
more notches to 'BBB' or below; or (ii) the D-Cap is lowered by
to 0 (full discontinuity); or (iii) the AP that Fitch considers
in its analysis
increased above Fitch's 'AAA' breakeven level of 86.0%.
Kai-Uwe Richter, CFA, FRM
+49 69 7680 76131
Fitch Deutschland GmbH Taunusanlage 17
D-60325 Frankfurt am Main
+49 69 7680 76133
+49 69 7680 76261
Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49
69 768076 232,
Additional information is available at www.fitchratings.com.
Applicable criteria 'Covered Bonds Rating Criteria', dated 10
March 2014, are
available at www.fitchratings.com.
Applicable Criteria and Related Research:
Covered Bonds Rating Criteria
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