DBRS Upgrades Ratings on Bank of Ireland Mortgage Bank Mortgage Covered Securities Programme to “A” from A (low)

DBRS Ratings Limited (DBRS) has today upgraded the ratings of all outstanding Mortgage Covered Securities issued under the Bank of Ireland Mortgage Bank (BOIMB or the Issuer) EUR 15,000,000,000 Mortgage Covered Securities Programme (the Programme) to “A” from A (low) following the implementation of DBRS’s “Rating European Covered Bonds” methodology published on 17 December 2014 (the Methodology).

There are currently EUR 9.013 billion of Mortgage Covered Securities outstanding under the Programme.

The rating action reflects a material update to the methodology DBRS uses to rate and monitor European covered bonds. The Methodology supersedes the previous methodology “Rating European Covered Bonds,” published 30 January 2014.

The rating upgrade of BOIMB Mortgage Covered Securities to “A” from A (low) is based on the following analytical considerations:
• A Covered Bonds Attachment Point of BBB (high), being the rating of the Governor and Company of the Bank of Ireland, which is the Reference Entity. The Issuer is a fully owned subsidiary of the Reference Entity.
• A Legal and Structuring Framework (LSF) Assessment of Adequate assigned to the Programme.
• A Cover Pool Credit Assessment (CPCA) of BB (high), being the lowest CPCA in line with the covered bonds rating.
• An LSF-Implied Likelihood (LSF-L) of A (low).
• One notch uplift for high recovery prospects.
• A level of nominal overcollateralisation (OC) to which DBRS gives credit of 26.2% in accordance with its Methodology.

The transaction was modelled with the DBRS European Covered Bond Cash Flow Model. The main assumptions focused on the timing of defaults and recoveries of the assets, interest rate stresses and market value spreads to calculate liquidation values on the cover pool.

Everything else equal, a downgrade of the Reference Entity rating by one notch would lead to a downgrade of the LSF-L by one notch, resulting in a downgrade of the Mortgage Covered Securities rating by one notch.

In addition, the ratings of the Programme would be downgraded if any of the following occurs: (i) the CPCA were downgraded below BB (high); (ii) the sovereign rating of the Republic of Ireland were downgraded below A (low); (iii) the LSF Assessment associated with the Programme were downgraded; (iv) the quality and consistency of the cover pool were no longer sufficient to support one notch uplift for high recovery prospects; or (v) volatility in the financial markets caused the currently estimated market value spreads to increase.

As of 30 September 2014, the cover pool included EUR 12.543 billion of residential mortgage loans and EUR 1.377 billion of substitution assets.

DBRS has assessed the LSF related to the BOIMB Programme as Adequate according to its rating methodology. For more information, please refer to DBRS commentaries “DBRS Assigns LSF Assessment to Irish Covered Bonds” and “Irish Covered Bonds: Legal and Structuring Framework Review,” available at www.dbrs.com.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is Rating European Covered Bonds (December 2014), which can be found at www.dbrs.com. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include historical default performance data and loan by loan level information on the cover pool provided by the issuer that allowed DBRS to further assess the portfolio. DBRS considers that the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this Programme took place on 29 September 2014 when DBRS confirmed the rating upon completion of the annual review on the Porgramme.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

For further information on DBRS historic default rates published by the European Securities and Markets Administration in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Keith Gorman
Initial Rating Date: 18 April 2012
Initial Rating Committee Chair: Erin Stafford

Last Rating Date: 29 September 2014

Lead Analyst: Valentina Cicerone
Rating Committee Chair: Quincy Tang

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom

Registered in England and Wales: No. 7139960.

The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

• Rating European Covered Bonds
• Global Methodology for Rating Banks and Banking Organisations
• Legal Criteria for European Structured Finance Transactions
• Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model for European Securitisations
• Derivative Criteria for European Structured Finance Transactions