DBRS Morningstar Publishes Final Rating and Monitoring Covered Bonds Methodology and Updated Market Value Spreads Addendum

DBRS Morningstar finalised its “Rating and Monitoring Covered Bonds” methodology.

This methodology presents the criteria for which the ratings on all types of covered bonds (CB), whether issued under or outside country-specific CB legislation, are assigned and/or monitored.

DBRS Morningstar has included specific cases where the assessment of the quality of the cover pool to determine the Legal and Structuring Framework-Implied Likelihood (LSF-L) of the programme would not be necessary. These are cases where (1) DBRS Morningstar does not have a methodology applicable to the underlying assets backing the CB in the programme or (2) the LSF-L is equal to the Covered Bond Attachment Point (CBAP) and no rating uplift over the LSF-L is possible because of low recovery prospects. DBRS Morningstar deems this update to be material, as this assumption is considered a key assumption, but determined that no ratings are expected to change as a result of this update.

DBRS Morningstar also replaced the references to the senior unsecured ratings with references to the long-term senior debt ratings. DBRS Morningstar deems this update not to be material and determined that no ratings are expected to change as a result of this update.

The methodology supersedes the prior version published on 27 April 2020 and is effective as of 10 June 2021.

No comments were received during the request for comment (RFC) period for the methodology.

All comments received during the RFC period have been published to the DBRS Morningstar website, except in cases where confidentiality is requested by the respondent.

Furthermore, DBRS Morningstar published an updated version of its “Rating and Monitoring Covered Bonds Addendum: Market Value Spreads”.

DBRS Morningstar has conducted a periodic review of the addendum. This update supersedes the previous version published on 27 April 2020 and is effective as of 10 June 2021. DBRS Morningstar deems the update not to be material and determined that no ratings are expected to change as a result of this update.

Notes:
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

DBRS Morningstar methodologies are publicly available on its website www.dbrsmorningstar.com under Methodologies & Criteria.

For more information on this methodology or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].