DBRS Confirms Rating on Caixa Geral de Depositos Covered Bond Programme

DBRS Ratings Limited (DBRS) has today confirmed the “A” ratings on the EUR 6,901,450,000 Obrigações Hipotecárias (OH or the Portuguese legislative covered bonds) issued under the Caixa Geral de Depositos (CGD or the Issuer) Covered Bond Programme upon implementation of DBRS’s “Rating European Covered Bonds” methodology published on 17 December 2014 (the Methodology). 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 confirmation of the “A” ratings of the OH issued under the CGD OH programme also follows the completion of the annual review on the programme and is based on the following analytical considerations:
• A Covered Bonds Attachment Point of BBB (low), being the Senior Long-Term Debt & Deposit Rating of CGD. CGD is the Issuer and Reference Entity for the Programme.
• A Legal and Structuring Framework (LSF) Assessment of Average assigned to CGD OH Programme.
• A Cover Pool Credit Assessment (CPCA) of BBB (low), being the lowest CPCA in line with the covered bonds rating.
• An LSF-Implied Likelihood (LSF-L) of BBB (high).
• Two notches uplift for high recovery prospects.
• A level of overcollateralisation (OC) to which DBRS gives credit of 38.5%, being the level of OC to which the Issuer commits in the investor report. Such a level is not subject to haircut as DBRS has observed that it has been persistent for the past 24 months.

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 two notches, resulting in a downgrade of the covered bonds rating by two notches.

In addition, the ratings of the CGD OH would be downgraded if any of the following occurs: (i) the CPCA were downgraded below BBB (low); (ii) the sovereign rating of the Republic of Portugal were downgraded below BBB (low); (iii) the LSF assessment for the Programme were downgraded to Modest; (iv) the quality and consistency of the cover pool were no longer sufficient to support two notches uplift for high recovery prospects; or (vi) volatility in the financial markets caused the currently estimated market value spreads to increase.

As at 30 September 2014, the cover pool had a total outstanding balance of EUR 9,618,215,355. The available OC is 39.37%, which is above the current Issuer commitment OC of 38.5%.

For further information on CGD OH programme, please refer to the rating report that can be found on www.dbrs.com.

DBRS has assessed the LSF related to CGD OH as Average according to its rating methodology. For more information, please refer to DBRS commentaries “DRBS Assigns LSF Assessment to Portuguese Covered Bonds” and “Portuguese 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 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 transaction took place on 15 January 2014 when DBRS assigned a rating to Series 16.

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: 10 September 2012
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 15 January 2014

Lead Analyst: Vito Natale
Rating Committee Chair: Quincy Tang

DBRS Ratings Limited
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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