DBRS Fine-Tunes Its Approach to Canadian Covered Bonds

DBRS has today announced that it will start immediately to use an estimated market value spread to assess the asset percentage and corresponding overcollateralization (OC) for all Canadian covered bond programs. The application of market value spread is the same approach used under another DBRS methodology “Rating European Covered Bonds.”

To estimate the market value spread for Canadian residential mortgages, DBRS reviews the historical spreads of National Housing Act Mortgage-Backed Securities and Canada Mortgage Bonds and makes assumptions of the likelihood of sovereign support when an issuer is under stress to derive a proxy market value spread.

DBRS has reviewed all the outstanding covered bond programs based on the estimate of Canadian market value spread and determines there is no rating impact as the OC amount expected by DBRS under the revised approach is lower than the available OC amount for each program.