January 4, 2013 / 4:11 PM / 5 years ago

TEXT-S&P takes various actions on Postbank covered bonds

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.
     -- On Dec. 14, 2012, we put our ratings on Deutsche Postbank's 
mortgage-covered bonds and DSL Briefe covered bond program on CreditWatch 
negative due to the likelihood that these programs would not fully meet our 
counterparty criteria by Jan. 11, 2013, when the transition period ends.
     -- After reviewing these programs under our updated criteria, including 
the bank's progress in mitigating risks we have identified, we have concluded 
that account bank and commingling risks remain relevant for the two programs.
     -- We are therefore lowering our ratings on the mortgage-covered bond 
program to 'AA+' from 'AAA' and those on the DSL Briefe program to 'AA-' from 
'AAA'. At the same time, we are removing the ratings from CreditWatch. 
     -- We are affirming our 'AAA' ratings on Postbank's public-sector covered 
bonds.
     -- At the issuer's request, we are subsequently withdrawing the ratings 
on all three programs and related series. Before the withdrawal, the outlooks 
on the mortgage-covered bond and DSL Briefe were negative and that on the 
public-sector covered bond was stable.
    
     Jan. 4 - Standard & Poor's Ratings Services has today lowered to 'AA+' from
'AAA' its long-term issue ratings on the Hypothekenpfandbriefe (mortgage-covered
bond) of Germany-based Deutsche Postbank AG (A+/Negative/A-1). We
have also lowered our long-term issue ratings on Postbank's DSL Briefe program
to 'AA-' from 'AAA'. We have removed the ratings on both programs from
CreditWatch, where they were placed with negative implications on Dec. 14, 2012.

At the same time, we have affirmed our 'AAA/A-1+' issue ratings on Postbank's 
Oeffentliche Pfandbriefe (public-sector covered bond) program.

Upon the issuer's request, we have subsequently withdrawn the ratings on all 
three programs and related series. Before the withdrawal, the outlooks on the 
mortgage-covered bond and DSL Briefe were negative, and that on the 
public-sector covered bond program was stable.

Today's rating actions follow our review of the programs' asset and cash flow 
information as of Sept. 30, 2012, and the implementation of our updated 
counterparty criteria framework (see "Counterparty Risk Framework Methodology 
And Assumptions," published Nov. 29, 2012, and "Covered Bonds Counterparty And 
Supporting Obligations Methodology And Assumptions," published May 31, 2012). 
In line with our updated counterparty criteria framework, we have identified 
account bank risk and commingling risk as relevant for the programs. 

The review encompassed the credit quality of the cover pools, the cash flow 
structure of assets and liabilities, and likely counterparty risks. Because 
the most recent cash flow reports we have received are as of Sept. 30, 2012, 
and based on quarterly cash flow projections only, we used our worst-case 
assumptions to estimate the size of account bank and commingling risks. 

Since we published the criteria, we have been in regular contact with the 
issuer to monitor progress on addressing the risks we have identified and on 
setting up and implementing the action plan to meet the rating criteria. 

Under the criteria, using our worst-case assumptions for commingling risk, the 
available credit enhancement of 22.15% for the mortgage-covered bond program 
as of Sept. 30, 2012, is not sufficient to cover the target credit enhancement 
of 22.92% and is only commensurate with three notches of uplift above the 
issuer credit rating (ICR). 

Likewise, the available credit enhancement of 29.98% for the DSL Briefe as of 
Sept. 30, 2012, is not sufficient to cover the target credit enhancement of 
41.28%, and is only commensurate with one notch of uplift above the ICR. 

The available credit enhancement of 38.23% as of Sept. 30, 2012, for the 
public-sector covered bond program is sufficient to cover the target credit 
enhancement of 36.47% and is commensurate with the full four possible notches 
of uplift above the ICR.

Under our the criteria in "Revised Methodology And Assumptions For Assessing 
Asset-Liability Mismatch Risk In Covered Bonds," published Dec. 16, 2009, the 
ratings on the mortgage-covered bonds and DSL Briefe program could be six 
notches above the ICR, provided that the counterparty risks have been fully 
mitigated. In our view, these risks have not been fully covered. Therefore the 
negative outlooks before the withdrawal reflect the negative rating outlook on 
the issuer. All else being equal, a potentially negative rating action would 
also have an impact on the covered bond ratings.

The stable outlook on the public-sector covered bonds before the withdrawal 
reflects that the ratings incorporated only four of the five possible notches 
of uplift above the ICR. The one unused notch acts as a buffer, meaning that 
under our criteria a potential one-notch downgrade of the issuer would not 
automatically lead to a downgrade of the outstanding covered bonds, all else 
being equal.


RELATED CRITERIA AND RESEARCH
     -- Counterparty Risk Framework Methodology And Assumptions, Nov 29, 2012 
     -- Credit FAQ: What Factors Do We Consider When Analyzing Commingling And 
Account Bank Risk In Covered Bonds?, Nov. 26, 2012
     -- Covered bond Ratings Framework: Methodology And Assumptions, June 26, 
2012 
     -- Global Investment Criteria For Temporary Investments in Transaction 
Accounts, May 31, 2012 
     -- Covered Bonds Counterparty And Supporting Obligations Methodology And 
Assumptions, May 31, 2012 
     -- Assessing Asset-Liability Mismatch Risk In Covered Bonds: Revised 
Methodology And Assumptions For Target Asset Spreads, April 24, 2012
     -- Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology 
And Assumptions, June 14, 2011
     -- Principles Of Credit Ratings, Feb. 16, 2011 
     -- Advance Notice Of Proposed Criteria Change: Methodologies And 
Assumptions For Rating Certain Covered Bonds And CDOs, Aug. 5, 2010
     -- Revised Methodology And Assumptions For Assessing Asset-Liability 
Mismatch Risk In Covered Bonds, Dec. 16, 2009 
     -- Update To The Cash Flow Criteria For European RMBS Transactions, Jan. 
6, 2009 
     -- Update To The Criteria For Rating German Residential Mortgage-Backed 
Securities, Jan. 6, 2009 
     -- German Law Change Affects Mortgage Foreclosure Period Stresses, Nov. 
28, 2008
     -- A Listing Of S&P's New Actions Aimed At Strengthening The Ratings 
Process, Feb. 7, 2008 
     -- CDO Spotlight: Rating Approach To Synthetic CDOs Of Sovereigns Or 
Local And Regional Governments, May 3, 2006 
     -- European Legal Criteria for Structured Finance Transactions, March 23, 
2005 
     -- German Pfandbrief Framework Further Improved, March 30, 2004
     -- Cash Flow Criteria For European RMBS Transactions, Nov. 20, 2003 
     -- Surviving Stress Scenarios: Assessing Asset Quality of Public Sector 
Covered Bond Collateral, Sept. 30, 2003 
     -- Rating Pfandbriefe--The Analytical Perspective, Jan. 27, 2003
     -- Criteria For Rating German Residential Mortgage-Backed Securities, 
Aug. 31, 2001



RATINGS LIST

Downgraded; CreditWatch/Outlook Action; Ratings Withdrawn;

                         Final      To                   From

Deutsche Postbank AG 
 Mortgage Covered Bonds (Hypothekenpfandbriefe) 
  Issue Rating           NR         AA+/Negative         AAA/Watch Neg 
 DSL Briefe
  Issue Rating           NR         AA-/Negative         AAA/Watch Neg

Ratings Affirmed; Ratings Withdrawn

Deutsche Postbank AG 
 Public-Sector Covered Bonds (Oeffentliche Pfandbriefe)
  Issue Rating           NR         AAA/Stable/A-1+      AAA/Stable/A-1+


NR--Not rated.

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