Global Covered Bond Characteristics And ... - Standard & Poor's

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assessment, which includes: • Step 1: The classification of the asset-liability mismatch (ALMM measure; see paragraph 23 of the Dec. 16, 2009, criteria); • Step 2: The program categorization (see paragraph 33); and • Step 3: Our determination of the maximum rating uplift a respective covered bond program can achieve (see paragraph 53). Table 1 also provides the current ICR on the issuers, which we use as the starting point for the rating uplift on the covered bonds. The current covered bond ratings are the result of Step 5 of our criteria (see paragraph 68 of the Dec. 16, 2009, criteria), subject to an analysis of other risks and a committee decision. In Step 5, we compare the available credit enhancement with a target credit enhancement level that we determine in Step 4: The cash flow and market value analysis (see paragraph 57). If the available credit enhancement matches or exceeds the target credit enhancement, then a covered bond program may achieve the maximum potential rating uplift. If the available credit enhancement is lower, we may assign a single notch of uplift to the covered bond rating if the available credit enhancement is sufficient, in our opinion, to cover asset-default risk. We may also elevate the covered bond rating by further notches depending on the level of ALMM risk that any remaining actual credit enhancement covers. We also provide an outlook on the rating on the covered bonds. The outlook provides our opinion of a program's potential for a rating change and its direction over the intermediate term. The covered bond outlook takes into account our views on the outlook on the issuer, the level of rating uplift achieved, the likelihood of changes in ALMM risk, and potential rating changes due to the performance of the collateral. In this article, we use the terms "issuer" or "issuing bank" to refer to the financial institution behind the covered bond program, even though the issuer of the bonds may technically be a special-purpose entity, depending on the program structure. Furthermore, we assign ratings to covered bonds, although we may refer to the rating on a program. At the end of the article, we have included a glossary of terms and explanations that we have used in the tables below and which represent to a large degree the terminology Standard & Poor's uses in its rating analysis. We recommend that readers refer to these definitions in conjunction with the data we have provided. Glossary Of Definitions Global Covered Bond Characteristics And Rating Summary Q4 2011 ALMM The asset-liability mismatch as described in paragraphs 23 to 32 of "Revised Methodology And Assumptions for Assessing Asset-Liability Mismatch Risk In Covered Bonds," published Dec. 16, 2009. Asset default risk We assign the first notch of uplift above the issuer's ICR if the available credit enhancement covers that asset default risk (see Step 5 of our 2009 ALMM criteria). The asset default risk equals all credit risks related to the default of the cover pool assets, including interest rate risks and foreign exchange rate risks. In other words, the asset default risk reflects all credit and cash flow risk except the market value risk arising from ongoing ALMMs. Standard & Poors | RatingsDirect on the Global Credit Portal | January 24, 2012 16 933241 | 301860146
Covered bond type This reflects our classification of covered bonds, whereby legislation-enabled covered bonds (LCBs) are covered bonds based on a specific covered bond legal framework, such as those in Germany, Finland, Sweden, Norway, Denmark, Luxembourg, Spain, Portugal, and France (Obligations foncières). Structured covered bonds (SCBs) are general law-based covered bonds issued in countries such as France, the U.S., and Canada. In addition, covered bonds issued from the U.K., The Netherlands, and Italy use a combination of legislation and general law framework and are included in our definition of SCBs. Unused uplift (notches) The unused uplift, which is determined in notches, is the difference between the maximum potential number of notches uplift above the issuer's ICR (according to Step 3 of our 2009 ALMM criteria) and the number of notches between the issuer's ICR and the maximum potential rating on the covered bonds. For the purpose of this article, covered bond programs can only have an unused uplift if the available credit enhancement is commensurate with the target credit enhancement level and if the maximum potential rating on the covered bonds is 'AAA'. For example, an unused uplift of three notches may be the result of a covered bond issuer having an ICR of 'A+' and a covered bond program having a maximum potential number of notches uplift of seven and where the assigned rating on the covered bonds is 'AAA'. Outstanding liabilities For SCBs, this amount either reflects the outstanding liabilities as of the respective reporting date or the outstanding liabilities including new issuances that appeared after the reporting date. In future updates on this article, we expect the numbers to represent the outstanding amount of just the quarterly surveillance reports. Reporting date Note that the tables show data mainly as of June 2011 or more recent data. Covered bond programs don't all report at the same cut-off date, although generally at least on a quarterly basis. Global Covered Bond Characteristics And Rating Summary Q4 2011 Please note that sometimes we receive more updated cash flow data--that is, while the asset reports could stem from June 2011, we have received updated cash flow data or an updated amount of the liabilities, due to further issuance, for example. In these cases, the reporting date referred to in the tables in this article is the cut-off date of updated cash flow data. The characteristics that are dependent on the provided data of the liabilities, such as the ALMM percentage, have been updated based on the most recent data received on the liabilities. Scenario default rate (SDR) The SDR is the modeled gross level of asset defaults of the public-sector and other assets (except mortgage loans) that the CDO Evaluator estimates and that covered bonds are expected to be able to withstand at the 'AAA' rating level, consistent with our rating criteria (see "Credit Rating Model: CDO Evaluator 5.1," published Aug. 16, 2010, and paragraph 70 of "Revised Methodology And Assumptions for Assessing Asset-Liability Mismatch Risk In Covered Bonds," published Dec. 16, 2009. This figure is comparable to the WAFF for mortgage loans. Soft bullet This indicates whether the respective covered bond program has outstanding covered bonds with soft-bullet structures. Covered bonds with soft-bullet structures provide for the possibility to extend the scheduled maturity for a certain period of time. Typically, this might be a 12- to 24-month period, but this can also result in the structure www.standardandpoors.com/ratingsdirect 17 933241 | 301860146
Page 1 and 2: Global Covered Bond Characteristics
Page 3 and 4: from the ALMM. Global Covered Bonds
Page 5 and 6: Table 1 Global Covered Bond Charact
Page 7 and 8: Table 1 Global Covered Bond Charact
Page 9 and 10: Table 2 Mortgage Covered Bond Chara
Page 11 and 12: Table 3 Mortgage Covered Bond Chara
Page 13 and 14: Table 4 Public Covered Bond Charact
Page 15: Our Five-Step Approach To Rating Co
Page 19 and 20: WA rating The purpose of displaying
Page 21: Copyright © 2012 by Standard & Poo

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