DBRS Confirms Ratings on Claris RMBS 2014 S.r.l. and Claris RMBS 2016 S.r.l.

DBRS Ratings Limited (DBRS) confirmed the following ratings on Claris RMBS 2014 S.r.l. (Claris RMBS 2014) and Claris RMBS 2016 S.r.l. (Claris RMBS 2016) transactions:

Claris RMBS 2014:
-- Class A1 Notes confirmed at AAA (sf)
-- Class A2 Notes confirmed at AAA (sf)

Claris RMBS 2016:
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at A (high) (sf)

The confirmations follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the latest payment date for each transaction;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions for the outstanding collateral pools; and
-- The current credit enhancement (CE) available to the rated notes to cover the expected losses at their current rating level.

For Claris RMBS 2014, the ratings on the Class A1 and Class A2 Notes address timely payments of interest and ultimate payment of principal on or before the final maturity date in December 2061.

For Claris RMBS 2016, the rating on the Class A Notes addresses timely payments of interest and ultimate payment of principal, whereas the rating on the Class B Notes addresses ultimate payment of interest and principal on or before the final maturity date in October 2068.

Claris RMBS 2014 and Claris RMBS 2016 are two securitisations of mortgage loans initially originated by Veneto Banca S.p.A. (VB) and Banca Apulia S.p.A. (BAP), a bank part of the Veneto Banca banking group. Effective from 26 June 2017, following the liquidation of VB, the servicing and operating activities of these transactions have been transferred with no disruption to Intesa Sanpaolo S.p.A. Please refer to DBRS’s commentary “No Disruption in Servicing Activities of BPVi and VB Securitisations” for more information.

PORTFOLIO PERFORMANCE
Both portfolios are performing within DBRS’s expectations. For Claris RMBS 2014, the 90+ delinquency ratio has been relatively stable over the year and, as of the December 2017 payment date, was at 2.63% of the collateral portfolio, while the current cumulative default ratio (as a percentage of the original portfolio balance) stood at 3.01%. For Claris RMBS 2016, as of the January 2018 payment date, the 90+ delinquency ratio was at 1.36% of the collateral portfolio, while the current cumulative default ratio stood at 0.35%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining collateral pools of receivables and maintained its PD and LGD assumptions. For Claris RMBS 2014, the base-case PD and LGD are 4.5% and 4.6%, respectively, while for Claris RMBS 2016, they are 11.1% and 10.6%, respectively.

CREDIT ENHANCEMENT
The CEs available to all rated notes have continued to increase as the transactions continue to deleverage. The CEs consist of the overcollateralisation provided by the outstanding collateral portfolios. For Claris RMBS 2014, as of December 2017, the CE to the Class A1 and Class A2 Notes was 72.5% and 38.8%, respectively, increasing from 60.4% and 32.2% as of December 2016. For Claris RMBS 2016, as of October 2017, the CE to the Class A and Class B Notes was 24.2% and 12.9%, respectively, increasing from 20.0% and 10.0% as at closing.

The Cash Reserve Fund of each transaction is available to pay senior fees and expenses, and missed interest on the Class A1 and Class A2 Notes for Claris RMBS 2014, and only on the Class A Notes for Claris RMBS 2016. The reserves are currently at their target levels of EUR 10.6 million (1.5% of the outstanding balance of the Class A1 and Class A2 Notes at closing) for Claris RMSB 2014, and EUR 24.5 million (3.0% of the outstanding balance of the Class A Notes at the preceding payment date) for Claris RMSB 2016.

The Bank of New York Mellon S.A./N.V., Milan Branch and The Bank of New York Mellon S.A./N.V., London Branch are the Italian and English Account Banks for Claris RMBS 2014, respectively. The DBRS public rating on the Account Banks complies with the Minimum Institution Rating, given the rating assigned to the Class A1 and Class A2 Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

BNP Paribas Securities Services, Milan branch is the Account Bank for Claris RMBS 2016. The DBRS private rating on the Account Bank complies with the Minimum Institution Rating, given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

J.P. Morgan Securities plc and Natixis S.A., London branch are the Swap Counterparties to Claris RMBS 2014, whereas J.P. Morgan Securities plc is the only Swap Counterparty to Claris RMBS 2016. The DBRS’s private rating of those entities complies with the First Rating Threshold defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology. Obligations under the swap agreements are guaranteed by J.P. Morgan Chase Bank N.A.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology”.

DBRS has applied the principal methodology consistently and conducted a review of the transactions in accordance with the principal methodology.

A review of the transactions legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in the transactions are listed at the end of this press release.

These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

The sources of data and information used for the ratings include servicer reports provided by Intesa, investors reports provided by The Bank of New York Mellon for Claris RMBS 2014, payments and investors reports provided by Securitisation Services S.p.A. for Claris RMBS 2016, and loan-by-loan level data from the European DataWarehouse GmbH.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

For Claris RMBS 2014, at the time of the initial rating, DBRS was not supplied with third-party assessments. For Claris RMBS 2016, at the time of the initial rating, DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on Claris RMBS 2014 took place on 12 April 2017, when the Class A1 and the Class A2 Notes were confirmed at AAA (sf). This is the first rating action on Claris RMBS 2016 since the Initial Rating Date.

The lead analyst responsibilities for both transactions have been transferred to Ilaria Maschietto.

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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 to the parameters used to determine the rating (the “Base Case”):

-- DBRS expected a Base Case PD and LGD for the portfolio based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and, therefore, have a negative effect on credit ratings.

-- For Claris RMBS 2014, the Base Case PD and LGD of the pool of mortgages are 4.5% and 4.6%, respectively. At the AAA (sf) rating level, the corresponding PD is 27.4% and the LGD is 26.2%.
-- For Claris RMBS 2016, the Base Case PD and LGD of the pool of mortgages are 11.1% and 10.6%, respectively. At the AAA (sf) rating level, the corresponding PD is 36.9% and the LGD is 34.1%. At the A (high) (sf) rating level, the corresponding PD is 27.8% and the LGD is 26.2%.

-- 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 increased by 50%, the rating of the Claris RMBS 2014 Class A1 Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increased by 50%, the rating for the Class A1 Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increased by 50%, the rating of the Class A1 Notes would be expected to remain at AAA (sf).

Claris RMBS 2014:
Class A1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in LGD, expected rating of AAA (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 AAA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf).

Class A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in LGD, expected rating of AAA (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 AAA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf).

Claris RMBS 2016:
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in LGD, expected rating of AAA (sf).
-- 25% increase in PD, expected rating of AAA (sf).
-- 50% increase in PD, expected rating of AA (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 (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf).

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf).
-- 50% increase in LGD, expected rating of A (high) (sf).
-- 25% increase in PD, expected rating of A (high) (sf).
-- 50% increase in PD, expected rating of BBB (high) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf).

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) 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 and US regulations only.

Lead Analyst: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date Claris RMBS 2014: 31 March 2014
Initial Rating Date Claris RMBS 2016: 24 January 2017

DBRS Ratings Limited
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The rating methodologies used in the analysis of the transactions can be found at: http://www.dbrs.com/about/methodologies.

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

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.