April 24 - Standard & Poor’s Ratings Services today released its revised methodology and assumptions for target asset spreads when assessing asset-liability mismatch risk in covered bonds.
The criteria update some of the target asset spreads and definitions of buckets for residential and commercial mortgage loan cover pools described in “Revised Methodology And Assumptions For Assessing Asset-Liability Mismatch Risk In Covered Bonds,” published Dec. 16, 2009, on RatingsDirect on the Global Credit Portal (Step 4: Cash Flow And Market Value Analysis; paragraphs 59-67), and clarify the methodology for revising these periodically. The criteria also update some of the asset spreads and definitions of buckets for public sector cover pools, and clarify the methodology for revising these periodically. The update is based on the recent widening in spreads observed in certain European residential mortgage-backed securities (RMBS) and sovereign markets, as well as the application of the methodology for reviewing these periodically.
The criteria, Assessing Asset-Liability Mismatch Risk In Covered Bonds: Revised Methodology And Assumptions For Target Asset Spreads,” addresses the principles of “credit quality” of the assets and the “payment structure and cash flow mechanics” described in “Principles Of Credit Ratings,” published Feb. 16, 2011.