DBRS Confirms Rating on Belgian Lion NV/SA-Compartment Belgian Lion RMBS II

DBRS Ratings Limited (DBRS) has today confirmed its rating of AAA (sf) on the Class A1 and Class A2 Notes (together, the Class A Notes) issued by Belgian Lion II NV/SA (the Issuer).

The confirmation of the ratings of the Class A Notes is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the February 2015 payment date.
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement for the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Belgian Lion RMBS II is a securitisation of first ranking Belgian residential mortgages originated and serviced by ING Belgium SA/NV. The structure included a revolving period during which the Issuer could purchase new loans (subject to certain eligibility criteria) using principal receipts from the mortgage portfolio. The revolving period terminated recently, and the Class A1 Notes started to amortise on 25 February 2015.

The transaction is performing within DBRS’s expectations. Defaulted loans are defined in the legal documentation as loans in arrears for 90 days or more. As per the February 2015 payment date, the cumulative default ratio (as a percentage of the original balance of the portfolio) stands at 0.84%. The 90+ delinquency ratio as a percentage of the performing balance of the portfolio remained stable over the year and is currently at 0.33%.

The credit enhancement to the Class A Notes slightly increased to 16.20% in February 2015 from 16.00% at rating, but the revolving period terminated recently. Credit enhancement to the Class A Notes is provided by subordination of the Class B Notes and a non-amortising reserve fund. The reserve fund is available to cover any shortfalls in payment of senior fees and interest of the Class A Notes and is currently at the initial and target level of EUR 129.12 million.
ING Belgium SA/NV holds the Treasury Account for the transaction. The DBRS private rating of ING Belgium SA/NV is at least equal to the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions. ING Belgium SA/NV also acts as hedging counterparty for the transaction. The DBRS private rating of ING Belgium SA/NV complies with the applicable DBRS Derivative Criteria.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology. 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’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include investor reports provided by ING Belgium SA/NV and data from the European DataWarehouse. 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 transaction took place on 11 April 2014 when DBRS confirmed the ratings on the Class A1 and Class A2 Notes at AAA (sf).

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

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the base case):
-- DBRS expected a lifetime base-case probability of default (PD) and LGD for the pool based on a review of the current receivables. Adverse changes to asset performance may cause stresses to base-case assumptions and therefore have a negative effect on credit ratings.
-- The base-case PD and LGD of the current pool of mortgages for the Issuer are 2.78% and 41.87%, respectively. At the AAA (sf) rating level, the corresponding PD is 26.23% and the LGD is 58.97%.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base-case assumption. For example, if the LGD increases by 50%, the rating on the Class A1 Notes would be expected to fall at AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A1 Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating on the Class A1 Notes would be expected to fall to A (high) (sf).

Class A1 notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)

Class A2 notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)

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: Kali Sirugudi
Initial Rating Date: 9 July 2012
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Erin Stafford

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.

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