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Covered Bonds

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Outlooks 2020

Global Covered Bonds

Fitch Ratings’ stable sector outlook for global covered bonds reflects the predominantly Stable Outlooks for issuing banks and the corresponding sovereign rating. 

Limited Rating Uplift for Renewable Energy Covered Bonds

The idiosyncratic nature of renewable energy assets and the expected high concentration in a cover pool solely consisting of them means there would be limited rating uplift for renewable energy covered bonds. We would most likely rate this type of covered bonds either at the bank's Issuer Default Rating (IDR) or one or two notches above it to reflect their exemption from bail-in in an issuer resolution scenario, if applicable.

Webinar on Demand

ESG Relevance Scores for Structured Finance & Covered Bonds – The Fitch Approach

Listen to Fitch Ratings content on demand for webinars which will outline Fitch’s recently launched ESG relevance scores for structured finance and covered bonds.
 

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EMEA & Asia Session
Americas Session

Fitch is the First Ratings Agency to Bring ESG Relevance Scores to Structured Finance and Covered Bonds

Our ESG Relevance Scores show the relevance and materiality of ESG to our rating decisions and are integrated into our ABS, CMBS and RMBS transaction reports and covered bonds program research to transparently and consistently display the impact of ESG elements on our credit ratings.
 

Watch the VideoIntroducing ESG Relevance Scores - Update for Structured Finance and Covered Bonds

Introducing ESG Relevance Scores for Structured Finance and Covered Bonds

Fitch Ratings says social and governance risks have the most impact on its new environmental, social and governance relevance scores for structured finance and covered bonds (SF and CvB) ratings globally. Initial results show on aggregate 18% of transactions and programs across SF and CvB asset classes contain contributing ESG factors or credit rating drivers.

Fitch Rates Banca Popolare dell'Alto Adige S.p.A.'s Covered Bonds 'AA(EXP)'; Outlook Negative

Fitch Ratings has assigned Banca Popolare dell'Alto Adige S.p.A.'s (BPAA, BB+/Stable/B) first mortgage covered bonds (Obbligazioni Bancarie Garantite, OBG) an expected rating of 'AA(EXP)' with a Negative Outlook. The 'AA(EXP)' rating is based on an indicative issuance of up to EUR300 million with an assumed seven-year maturity.

Fitch Rates Bankoa's Mortgage Covered Bonds 'AA-'; Outlook Stable

Fitch Ratings has assigned Bankoa S.A. (Bankoa, A-/Stable/F1) mortgage covered bonds (Cedulas Hipotecarias, CH) a 'AA-' rating with a Stable Outlook. The CH are collateralised by the originator's entire mortgage loan book. Bankoa is a credit entity established in the north of Spain.

Virtual Investor Meeting

Virtual Investor Meeting - EMEA Covered Bonds

The German and Danish covered bonds markets are two of the oldest and largest. Senior members of Fitch’s covered bonds ratings team discuss these markets and the impact on our rating analysis in our Virtual Investor Meeting on EMEA Covered Bonds

Loan Repayment Buffer; Lower-Risk Lending Offsets Australian Household Debt Rise

Borrowers are able to prepay amounts into their mortgage loans by more than the scheduled payment, building up equity in the mortgage and reducing the principal amount outstanding. A redraw facility can be used to draw back excess payments, which are allowed at the lender's discretion.

Interactive Content

Minimum Loss Assumptions Frequently Drive Residential Cover Pool Loss Rates

Fitch Ratings' loss floor assumptions drive the 'B' portfolio loss rate (PLR) for one third of residential cover pools for which we carry out a quantitative loss analysis. This reflects the generally low-risk nature of residential loans securing the covered bonds we rate.
 

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rating action

Van Lanschot's Second Programme's Covered Bonds Assigned 'AAA' Rating; Outlook Stable

The 'AAA' covered bonds rating is based on Van Lanschot N.V.'s Long-Term Issuer Default Rating (IDR; BBB+/Stable), the various uplifts above the IDR granted to the programme and the 87.5% asset percentage (AP) that Fitch relies on in its analysis, based on the highest nominal AP since programme inception, or over the last 12 months once the programme is older than one year. This provides more protection than Fitch's 'AAA' breakeven AP of 96%.

Higher Loss-Absorbing Capacity Rules to Slow Australia CVB Issuance

The Australian Prudential and Regulation Authority (APRA) in July 2019 announced its final rules on banks' total loss-absorbing capacity, which called on the four major banks to increase their capacity by 3pp of risk-weighted assets by January 2024.

2019 Virtual Investor Meetings: Asia-Pacific Covered Bonds

The outlook for Asia-Pacific covered bonds looks broadly stable. In our latest Virtual Investor Meeting, Claire Heaton, Senior Director, discusses buffers against falling home prices in Australia and the rise of local currency covered bonds.

Surveillance Snapshot

See the latest quarterly information for Fitch-rated covered bond programmes globally.

rating action

Fitch Rates UCI's Inaugural Structured Covered Bonds 'A'

Fitch Ratings has assigned Fondo de Titulizacion Structured Covered Bonds UCI's notes a 'A' rating with a Stable Outlook.

Major UK Bank Covered Bond Ratings Resilient to 'No-Deal' Brexit

Fitch Ratings says the 'AAA' ratings of covered bonds issued by major UK banks continue to show strong credit characteristics, which should help them endure potential deterioration in their environment as a consequence of 'no-deal' Brexit.

rating action

Fitch Assigns Credit Suisse (Schweiz) AG Soft-Bullet Covered Bond Final 'AAA'; Outlook Stable

Fitch Ratings has assigned Credit Suisse (Schweiz) AG's (CS Switzerland, A/Positive/F1) first mortgage covered bond a final rating of 'AAA' with a Stable Outlook. CS Switzerland's first issue is a CHF250 million fixed-rate bond, with a 10-year maturity and a 12 month soft-bullet feature. 

Dutch Hard & Soft-Bullet CVB Benefit from High Issuer Ratings

The 'AAA' ratings of the mortgage covered bonds issued by ING Bank N.V. (AA-/Stable) under its two programmes, by ABN AMRO Bank N.V. (A+/Stable) and by De Volksbank (A-/Stable) are supported by their high issuer ratings. They allow the 'AAA' breakeven asset percentage (AP) of ING's and ABN AMRO's covered bonds to be based on a recovery analysis above the rating floor for the covered bonds, leading to high 'AAA' breakeven AP for these programmes. 

Norwegian Floating-Rate Mortgages Show Strong Buffers

Fitch Ratings says strong competition, affordability rules and robust social safety nets mitigate risks from the high level of residential mortgage debt bearing a floating interest rate in Norway. This is highlighted in a third of a series of reports published by Fitch exploring unique features of selected mortgage markets. 

Fitch Assigns 'AAA' Final Ratings to AXA Home Loan SFH's OFH; Outlook Stable

Fitch Ratings has assigned AXA Home Loan SFH's (AXA HL SFH) obligations de financement de l'habitat (OFH) 'AAA' ratings. The Outlook is Stable.

Fitch Assigns Arkea Home Loan SFH's OFH 'AAA' Final Ratings ; Outlook Stable

 Fitch Ratings has assigned Arkéa Home Loan SFH's (Arkéa HL SFH) obligations de financement de l'habitat (OFH) final 'AAA' ratings. The Outlook is Stable. 

Higher Canadian Covered Bond Cap May Aid Small Bank Funding

The recent revision of the Canadian covered bond issuance cap by regulators to 5.5% from 4.0% of issuer assets is not likely to impact the funding or credit profiles of the existing CB issuers. However, to the extent the cap increase provides smaller banks access to low-cost funding, it would be viewed positively from a credit perspective. 

No Concerns Over Slow Amortising Swiss Mortgages

Current Swiss loan-to-value (LTV) ratios are sustainable with strong recovery rates calculated under our stressed market value decline assumptions, despite slow amortisation, Fitch Ratings says in a new report.The report analyses the risks and mitigants associated with slow mortgage amortisation and high mortgage debt in Switzerland.

No Impact on CVB from Revised Short-Term Ratings Criteria

Fitch Ratings says it does not expect its covered bonds ratings to be impacted by the agency's revised Short-Term Ratings Criteria. This is despite that changes to bank's Short-Term Issuer Default Rating (IDR) may lead to a change in the level of overcollateralisation protection taken into account by Fitch in its analysis of covered bonds. 

'BBB' Category Exposures Unlikely to Jeopardise CVB Ratings

Fitch Ratings does not expect the additional eligibility of credit quality step 3 (CQS3) counterparty exposures - equivalent to 'BBB' category ratings - envisaged in the legislation on covered bonds harmonisation, which have been provisionally approved by the EU parliament on 18 April 2019, to materially weaken covered bonds' credit risk.

Unique Mortgage Market Features

In the first of a series exploring unique features of certain mortgage markets, Fitch Ratings analyses the risks and mitigants associated with long mortgage tenors in Sweden.

Italian Deposit Ratings Expand Eligible Counterparties for 'AA' CVBs

The recent assignment of a Deposit Rating (DR) to Italian banks, in those cases where it is higher than the bank's Issuer Default Rating, makes Italian covered bonds with internal counterparties more resilient to issuer downgrades. Under Fitch's Structured Finance and Covered Bonds Counterparty Rating Criteria, the agency uses the DR, when available, as a reference rating for account banks' eligibility thresholds. 

SG Covered Bonds Use Distributed Ledger Technology; No Impact

The use of a Distributed Ledger Technology (DLT) platform to register Societe Generale SFH's Obligations de Financement de l'Habitat (OFH) has no rating impact on the underlying covered bonds.

EU Covered Bonds Directive Broadly Positive; Impact Uneven

 The EU's covered bonds directive broadly supports the credit quality of the asset class by setting minimum standards in key areas. In practice, existing national regulations and market conventions already meet many of these standards, but where this is not the case, the directive could be positive for some covered bond ratings. 

Italian Covered Bonds Peer Review

The five 'AA' rated Italian mortgage covered bonds programmes (Obbligazioni Bancarie Garantite, OBG) are resilient to negative rating actions on the respective banks' Issuer Default Ratings (IDRs), owing to the three-to-four-notch cushion against an issuer downgrade

 

Click Below for more information on the 
Italian Covered Bonds Peer Review

rating action

Fitch Rates Westpac's Series 2019-C3, C4 & C5 Mortgage Covered Bonds 'AAA'; Outlook Stable

The 'AAA' covered bond rating is based on WBC's Long-Term Issuer Default Rating (IDR) of 'AA-', an IDR uplift of zero notches, a payment continuity uplift of six notches, a recovery uplift (RU) of one notch and the asset percentage (AP) of 91.0% used in the programme's asset coverage test, which provides more protection than Fitch's breakeven AP of 91.5%. 

Mid-Sized UK Banks' Cover Pools See Stable Credit Risk

They benefit from large over-collateralisation buffers above the level supporting their current ratings and high quality mortgage cover pools. The six programmes included in the peer review are those of Coventry Building Society (Coventry), Yorkshire Building Society (Yorkshire), Leeds Building Society (Leeds), Skipton Building Society (Skipton), Clydesdale Bank plc (Clydesdale) and The Co-operative Bank Plc (Co-op).

rating action

Virgin Money's Covered Bond Final 'AAA'

With its first issue, VM has become the first UK covered bond issuer where both assets and liabilities are fully linked to the SONIA rate. The initial issue is an unhedged GBP500 million floating-rate note paying compounded SONIA with a five-year maturity and a one-year soft-bullet feature.

Webcast

IBOR Transition Webinar

Available On-Demand

Fitch’s Chief Credit Officer, Jeremy Carter, and Group Credit Officer, Andreas Wilgen, discuss the progress which has been made to prepare financial markets for the discontinuation of IBOR indices and highlight the risks which still remain.

 

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rating action

The Co-operative Bank's CVB on Rating Watch Negative

The covered bonds have been placed on RWN because they are rated at their maximum achievable level above Co-op's IDR and the IDR has been placed on RWN. The covered bonds rating will be impacted by any action taken on Co-op's IDR. 

Credit Hotspot: Conditional Pass-Through Mortgage Covered Bonds

Latest: Bank of Cyprus Covered Bonds Upgraded to 'BBB' on New Data

Contacts

Hélène M. Heberlein

Global

Hélène M. Heberlein

Analytical Sector Head & EMEA

+33 1 44 29 9140

Beatrice Mezza

EMEA

Beatrice Mezza

Business

+44 203 530 1273

Claire Heaton

APAC

Claire Heaton

Analytical

+61 2 8256 0361

Suzanne Mistretta

North America

Suzanne Mistretta

Analytical

+1 212 908 0639

Andrew Smitiuch

Canada

Andrew Smitiuch

Business

+ 1 416 703 4824

Maria Moreno

LatAm

Maria Moreno

Analytical

+57 1 326 9999

Samuel Fox

LatAm

Samuel Fox

Business

+1 312 606 2307

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