Link to Fitch Ratings' Report: Feedback Analysis: Covered Bonds Rating CriteriaNov 12 - Fitch Ratings has published a report that provides a summary of the
feedback received during the consultation period for changes proposed to its
covered bonds rating criteria. The feedback analysis report also explains any
deviation from the proposed changes and why the criteria update mainly reflects
the proposals as originally presented.
In September 2012, Fitch published its updated covered bonds rating criteria,
following the publication of the May 2012 exposure draft.
The main changes compared to the proposals outlined in the exposure draft were:
-- Wind down and dormant programmes considered in D-Cap analysis
Instead of considering the potential for cover pool deterioration for wind-down
and dormant programmes in its asset and cash flow analysis, Fitch considers the
risk of lower commitment to such programmes in the cover pool-specific
alternative management component of the D-Cap. In most cases, this leads to an
assessment that is one category worse than for a comparable programme that
continues to be actively used by the issuer.
--Additional credit for Eurosystem access
Fitch expanded the credit given for access to the Eurosystem via National
Central Bank funding, providing certain criteria are met. The additional credit
is applied within the Liquidity Gap and Systemic Risk component of the
--More favourable treatment for certain commercial mortgage programmes
If it is possible for the alternative manager to cherry pick loans and there are
sufficient prime assets to cover expected liquidity gaps, Fitch will likely
apply a more favourable risk liquidity gap and systemic risk assessment than for
programmes without these features.
--More details regarding risk assessments
Additional detail was provided on the types of characteristics likely to lead to
the different risk assessments for each D-Cap analysis component.
Fitch thanks the various covered bond issuers and industry associations and the
few investors and arrangers who provided feedback during the exposure draft's
six-week consultation period. The agency reviewed and carefully considered all
feedback prior to the publication of its updated covered bonds rating criteria.