Press Release

DBRS Morningstar Upgrades Rating on Banca Carige S.p.A. Covered Bonds (OBG - Mortgages - Programme 3) to AA (high)

Covered Bonds
August 03, 2022

DBRS Ratings GmbH (DBRS Morningstar) upgraded its rating on the obbligazioni bancarie garantite (OBG; the Italian legislative covered bonds) outstanding under the EUR 3,000,000,000 Banca Carige S.p.A. Covered Bonds Programme (Carige OBG3 or the Programme) to AA (high) from BBB (high) and removed the rating from Under Review with Positive Implications, where it was placed on 28 February 2022 and maintained on 20 May 2022.

Concurrently, DBRS Morningstar discontinued its rating on Series 637 (ISIN IT0005225351), which was fully repaid on 25 May 2022.

As of the date of this press release, there is one series of OBG, totalling an outstanding nominal amount of EUR 115 million under the Programme. The series is guaranteed by Carige Covered Bond S.r.l.

The rating reflects the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of A (low), which is the Long Term Critical Obligations Rating of Banca Carige S.p.A. (Carige). Carige is the Issuer and Reference Entity for the Programme. DBRS Morningstar classifies the Republic of Italy as a jurisdiction for which covered bonds (CBs) are a particularly important financing tool.
-- A Legal and Structuring Framework (LSF) Assessment of “Adequate” associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of “A”, which is the lowest CPCA in line with the assigned LSF-Implied Likelihood (LSF-L).
-- An LSF-L of AA (low).
-- A two-notch uplift on the LSF-L for high recovery prospects.
-- A committed minimum overcollateralisation (OC) of 20.5%, as expressed in the investor report, and the 32.1% OC to which DBRS Morningstar gives credit, equal to the minimum level observed in the last 12 months, adjusted by a scaling factor of 0.85.
-- The sovereign rating on the Republic of Italy, rated BBB (high) with a Stable trend by DBRS Morningstar, as of the date of this press release.

DBRS Morningstar analysed the transaction using its European Covered Bond Cash Flow tool. The main assumptions focused on the timing of defaults and recoveries of the assets and interest rate stresses. In accordance with DBRS Morningstar’s “Rating and Monitoring Covered Bonds” methodology, DBRS Morningstar did not consider any forced asset liquidation for this transaction, given the conditional passthrough structure, and assumed several prepayment scenarios.

Everything else equal, a one-notch downgrade of the CBAP would lead to a one-notch downgrade of the LSF-L, resulting in a one-notch downgrade of the CB ratings.

In addition, all else unchanged, the CB ratings would be downgraded if any of the following were to occur: (1) the CPCA was downgraded below “A”; (2) the LSF Assessment associated with the Programme was downgraded; or (3) the quality of the CP and the level of OC were no longer sufficient to support a two-notch uplift for high recovery prospects.

This rating action follows DBRS Morningstar’s 28 July 2022 upgrade of the Issuer’s ratings and, in particular, the upgrade of its Long Term Critical Obligations Rating to A (low) from B (high).

Following an Issuer default, and if there are insufficient funds to fully redeem any OBG Series at the relevant maturity date, such a series becomes payable according to a pass-through structure and its maturity is automatically extended up to the relevant extended maturity date.

The series currently outstanding under the Programme has a maturity date extendable by 38 years.

BNP Paribas Securities Services SCA, Milan Branch acts as the transaction bank and cash reserve account bank. Based on DBRS Morningstar’s private ratings on such bank and on the replacement provisions included in the documentation, DBRS Morningstar considers the risk of such counterparty to be consistent with the ratings assigned, in accordance with its “Legal Criteria for European Structured Finance Transactions” methodology.

The total outstanding amount of OBG is currently EUR 115 million while the aggregate balance of the CP as at 30 June 2022 was EUR 170 million of residential mortgages plus EUR 22 million of cash collections, resulting in a total OC of 61.1%.

As of 30 June 2022, the CP comprised 2,181 mortgage loans originated by Banca Carige and Banca del Monte di Lucca, which is part of the Carige Group. The weighted-average current loan-to-value ratio of the mortgages was 47.4% with an average seasoning of 4.8 years. The assets securing the loans in the CP are located mainly in Liguria (33.5%) and Lombardy (21.8%).

The CP comprised fixed-for-life loans (53.9% by outstanding balance) and floating-rate loans (46.1%). The floating-rate mortgage loans are indexed to different plain-vanilla indices and reset at different dates. In comparison, 100% of the liabilities pay a floating rate linked to three-month Euribor. The resulting interest and basis risks are not hedged. DBRS Morningstar has taken this into account in its cash flow analysis.

All CP assets and OBG are denominated in euros. As such, investors are not currently exposed to any foreign-exchange risk.

The weighted-average life (WAL) of the CP is about 8.6 years whereas the WAL of the OBG is currently 0.8 years, taking into account the expected maturity. The resulting asset-liability maturity mismatch is mitigated by the 38-year maturity extension and by the OC.

DBRS Morningstar assessed the LSF related to the Programme as “Adequate”, according to its rating methodology. For more information, please refer to the DBRS Morningstar commentary “Italian Obbligazioni Bancarie Garantite Legal and Structuring Framework”, which is available on

There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at

All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is “Rating and Monitoring Covered Bonds” (22 April 2022).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at:

In DBRS Morningstar’s opinion, the changes under consideration do not require the application of the entire principal methodology. Therefore, DBRS Morningstar focused on a cash flow analysis.

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

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at:

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report:

The sources of data and information used for these ratings include historical performance data (static pool default and recovery data from 2007 to 2021; dynamic pool delinquency and prepayments data from 2007 to 2021) as well as loan-level and stratification information on the CP as at 30 June 2022 provided by the Issuer.

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

At the time of the initial ratings, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

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

The last rating action on this transaction took place on 20 May 2022, when DBRS Morningstar confirmed its BBB (high) ratings on the series outstanding under the Programme and maintained the Under Review with Positive Implications status on the ratings.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage:

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Antonio Laudani, Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 21 May 2019

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Geschäftsführer: Detlef Scholz
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The rating methodologies used in the analysis of this transaction can be found at:

-- Rating and Monitoring Covered Bonds (22 April 2022),
-- Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (22 April 2022),
-- Global Methodology for Rating Banks and Banking Organisations (23 June 2022),
-- Legal Criteria for European Structured Finance Transactions (22 July 2022),
-- European RMBS Insight Methodology (28 March 2022) and European RMBS Insight Model v.,
-- European RMBS Insight: Italian Addendum (10 December 2021),
-- Operational Risk Assessment for European Structured Finance Originators (16 September 2021), originators.
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021),
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021),
-- Global Methodology for Rating Sovereign Governments (9 July 2021),
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022),

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at:

For more information on this credit or on this industry, visit or contact us at [email protected].