DBRS Maintains Under Review with Negative Implications Status on Banca Monte dei Paschi di Siena Programme 2

DBRS Rating Limited (DBRS) has today maintained the Under Review with Negative Implications status of the covered bonds issued by Banca Monte dei Paschi di Siena SpA (BMPS or the Issuer) under Banca Monte dei Paschi di Siena Programme 2 (BMPS P2 OBG or the Programme). All Series of BMPS P2 OBG covered bonds are rated “A.” BMPS has EUR 8.1 billion Obbligazioni Bancarie Garantite (OBG; the Italian legislative covered bonds) outstanding under Programme 2.

This follows the DBRS downgrade of the Senior Long-Term Debt & Deposit rating of the Issuer and Reference Entity of the Programme to BBB (low) from BBB on 18 February 2015. The ratings of the BMPS P2 OBG remain Under Review with Negative Implications, pending clarifications from the Issuer concerning implementation of remedial actions contemplated in the Programme documents.

In the absence of any remedial action, and everything else equal, the rating of the OBG would be downgraded by one notch to A (low). The ratings would remain Under Review with Negative Implications, as the Issuer’s ratings are Under Review with Negative Implications.

Should sufficient remedies be put in place, and subject to a level of overcollateralisation that DBRS may give credit to in line with a Cover Pool Credit Assessment (CPCA) of at least A (low), the “A” rating of the OBG may be maintained. The CPCA currently associated with the Programme is BBB. The ratings would remain Under Review with Negative Implications, as the Issuer’s ratings are Under Review with Negative Implications.

As of 30 December 2014, the mortgage cover pool includes mortgage loans with a notional balance of EUR 10.3 billion and EUR 946.7 million of principal available funds.

Following an Issuer default, the maturities of all OBG are extended to the long due for payment date, being 31 December 2057, and cash flows from the cover pool are allocated to all series on a pro rata and pari passu basis and distributed to OBG holders via a modified pass-through mechanism.

The OBG holders benefit from a reserve that builds over time with the cash flows from the cover pool up to an amount that is sufficient to cover senior costs and interest payments on the OBG for the subsequent rolling six months.

DBRS has assessed the legal and structuring framework (LSF) related to BMPS P2 OBG as Very Strong according to its rating methodology. For more information, please refer to DBRS commentaries “DBRS Assigns LSF Assessment to Italian Covered Bonds” and “Italian Covered Bonds: Legal and Structuring Framework Review,” available at www.dbrs.com.

All cover assets are euro denominated as well as all OBG issued. Hence, OBG holders are currently not exposed to any foreign exchange risk.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is Rating European Covered Bonds (December 2014). This can be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies. 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 data related to the cover pool provided by BMPS and an updated set of historical default performance data. DBRS considers 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 February 4, 2015, when DBRS assigned an “A” rating Under Review with Negative Implications to Series 16.

This rating is Under Review with Negative Implications. The review on the covered bonds will be resolved only once the conditions that lead to the assignment of review on the Issuer’s rating are resolved.

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: Valentina Cicerone
Initial Rating Date: 3 September 2013
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 4 February 2015

Lead Analyst: Valentina Cicerone
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 & Banking Organisations
-- Master European Structured Finance Surveillance Methodology
-- Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs)
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Unified Interest Rate Model Methodology for European Securitisations