July 17, 2014 / 1:46 PM / in 3 years

Fitch Affirms BNP Paribas Home Loan SFH's OFH at 'AAA'; Outlook Stable

(The following statement was released by the rating agency) PARIS, July 17 (Fitch) Fitch Ratings has affirmed BNP Paribas Home Loan SFH's (BNPP HL SFH) EUR22.1bn Obligations de Financement de l'Habitat (OFH) at 'AAA' with a Stable Outlook. The affirmation follows a revision of Fitch's breakeven asset percentage (AP) for a 'AAA' rating to 93% from 87%, as a result of the application of the agency's recently updated criteria (see Fitch Amends Covered Bonds Rating Criteria on Bank Resolution Developments, dated 10 March 2014) and changes to the programme documentation. The Stable Outlook on the OFH reflects that on BNP Paribas's (BNPP) Issuer Default Ratings (IDR; A+/Stable/F1). KEY RATING DRIVERS The rating of the OFH is based on BNPP's Long-Term IDR of A+/Stable - acting as reference IDR for this programme - an unchanged IDR uplift of 2, a revised Discontinuity Cap (D-Cap) of 2 (high discontinuity risk) from previously 4 (moderate discontinuity risk) and on the programme's contractual maximum AP of 92.5%. The lower protection provided by the increased 'AAA' breakeven AP results from a higher rating floor of 'AA' for the OFH following the assignment of a two-notch IDR uplift for BNPP HL SFH (see Fitch Affirms French Covered Bonds on Criteria Amendments, dated 28 March 2014). Consequently, the OFH can reach a 'AAA' rating based on recoveries given default exceeding 91% in this stress scenario, further giving a two-notch uplift from 'AA'. When evaluating recoveries from the cover pool, Fitch uses lower stressed refinancing spreads than when stress testing cash flows for the timely payment of covered bonds, assuming that the source of payment has transferred to the cover pool from BNPP. The 'AAA' breakeven AP is mainly driven by the cover pool's modelled credit losses of 6%. In its analysis, Fitch relies on the programme's contractual maximum AP of 92.5%. Should BNPP's IDR be downgraded, a breakeven AP of 93% would not be sufficient to maintain the OFH's 'AAA' rating. Fitch has tightened BNP HL SFH's Discontinuity Cap (D-Cap) to 2 (high discontinuity risk) from 4 (moderate discontinuity risk). This reflects the change in the Fitch's assessment of the liquidity gap and systemic risk component of the programme's D-Cap to 'high' from 'moderate', due to the reduction in the length of the pre-maturity test to six months from 12 months. This compares with Fitch's stressed liquidation timing assumption of nine months for French residential mortgage loans. The other components of Fitch's D-Cap analysis remain unchanged. Fitch also reviewed the removal of the comingling reserve, formerly part of the collection loss reserve account under the programme documentation. Should BNPP's IDR fall below 'A' or 'F1', the agency would deduct three months of collections from available cash flows to address the risk that collections may be lost in the transfer of the source of payment for the OFH from BNPP to the cover pool. RATING SENSITIVITIES The rating of the OFH issued by BNPP HL SFH is vulnerable to a downgrade if any of the following occurs: (i) BNPP's IDR is downgraded to 'BBB+' or below; (ii) the combined notches represented by the IDR uplift and the D-Cap fall to one or below; (iii) the level of AP that Fitch gives credit to in its analysis increases above Fitch's 'AAA' breakeven AP of 93%. Contact: Primary Analyst Francois-Xavier Deucher, CFA Director +33 1 44 29 92 72 Fitch France SAS 60, rue de Monceau 75008 Paris Secondary Analyst Will Rossiter Director +33 1 44 29 91 47 Committee Chairperson Helene Heberlein Managing Director +33 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 on www.fitchratings.com. Applicable criteria, 'Covered Bonds Rating Criteria', dated 10 March 2014; 'Counterparty Criteria for Structured Finance and Covered Bonds' and 'Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum', both dated 14 May 2014; 'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds', dated 23 January 2014; 'EMEA RMBS Master Rating Criteria', dated 28 May 2014; 'EMEA Residential Mortgage Loss Criteria, dated 28 May 2014; 'EMEA Criteria Addendum - France', dated 4 June 2014; 'Covered Bonds Rating Criteria - Mortgage Liquidity and Refinancing Stress Addendum', dated 4 February 2014, are available at www.fitchratings.com. Applicable Criteria and Related Research: Covered Bonds Rating Criteria 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 Residential Mortgage Loss Criteria here Criteria Addendum: France - Residential Mortgage Loss and Cash Flow Assumptions - Amended here Covered Bonds Rating Criteria – Mortgage Liquidity and Refinancing Stress Addendum 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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