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TEXT-Fitch:No rtg impact on Italian covered bonds from mid-sized banks' downgrade
September 3, 2012 / 9:54 AM / 5 years ago

TEXT-Fitch:No rtg impact on Italian covered bonds from mid-sized banks' downgrade

(The following statement was released by the rating agency)

Sept 03 - Fitch Ratings says that there is no rating impact on Banca Carige’s (Carige; ‘BB+'/Negative/‘F3’) and Banca Popolare di Milano’s (BPM, ‘BBB-'/Negative/‘F3’) Obbligazioni Bancarie Garantite (OBG), following the downgrades of the Long-term (LT) Issuer Default Rating (IDR) of the issuing entities (see “Fitch Downgrades 7 Italian Mid-sized Banks; Affirms 2” dated 28 August 2012 available at www.fitchratings.com ).

Carige’s OBG are currently rated ‘A-'. The combination of Carige’s LT IDR and the Discontinuity Factor (D-Factor) of 27.5% would still enable the OBG to be rated as high as ‘A+’ on a pure probability of default (PD) basis and up to ‘AA-’ when giving credit to recoveries, provided sufficient over-collateralisation (OC) is available to sustain such stress scenario. The level of asset percentage (AP) of 78.7%, which the issuer currently commits to publicly in its performance test report only allows the OBG to be rated as high as ‘BBB’ on a PD basis and ‘A-’ taking into account recoveries. The downgrade of Carige’s LT IDR has no impact on the maximum achievable rating on a PD basis and on the rating taking into account recoveries. All else being equal, the OBG rating could be maintained at ‘A-’ as long as the issuer’s Long-term IDR is at least ‘BB’ (see “Fitch Affirms Carige’s Covered Bonds Rating” dated 10 August 2012 available at www.fitchratings.com).

BPM’s OBG are currently rated ‘A’. The combination of BPM’s LT IDR and a D-Factor of 29% would still allow the OBG to be rated as high as ‘A+’ on a PD basis, and up to ‘AA’ when giving credit for recoveries, provided sufficient OC is available to sustain such stress scenario. The level of AP of 71%, which the issuer has pledged to commit to publicly allows the OBG to be rated as high as ‘BBB+’ on a PD basis and ‘A’ when giving credit to recoveries. The downgrade of the LT IDR has no impact on the maximum achievable rating on a PD basis and on the rating taking into account recoveries. All else being equal, the OBG rating could be maintained at ‘A’ as long as the issuer’s Long-term IDR is at least ‘BBB-’ (see “Fitch Downgrades BPM’s Mortgage Covered Bonds; Maintains on RWN” dated 26 July 2012 available at www.fitchratings.com ).

Fitch has published an exposure draft outlining a number of enhancements to its criteria for rating covered bonds (see ‘Fitch: Exposure Draft: Global Covered Bonds Rating Criteria’ dated 30 May 2012 at www.fitchratings.com). If implemented as proposed, the criteria changes would not impact the rating of Carige’s and BPM’s OBG.

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