Press Release

DBRS Morningstar Upgrades Ratings on Banco BPM Covered Bonds (OBG - Mortgages - Popolare Programme 1) to A (high)

Covered Bonds
October 18, 2022

DBRS Ratings GmbH (DBRS Morningstar) upgraded its ratings on the Obbligazioni Bancarie Garantite (OBG; the Italian legislative covered bonds) issued under the Banco BPM Covered Bonds Programme 1 (Banco BPM OBG1 or the Programme) to A (high) from “A” and discontinued its rating on Series IX (ISIN IT0005090516), which was fully repaid on 31 March 2022.

As of today, there are four outstanding series of OBG, for a total nominal amount of EUR 2.25 billion under the Programme. The series are guaranteed by BP Covered Bond S.r.l.

The ratings are based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of A (low), which is the Long Term Critical Obligations Rating (COR) of Banco BPM SpA (Banco BPM). Banco BPM is the Issuer and Reference Entity for the Programme. DBRS Morningstar classifies Italy as a jurisdiction in which covered bonds (CB) are a particularly important funding instrument and deems the cover pool (CP) strategic for the Issuer’s core activity;
-- A Legal and Structuring Framework (LSF) Assessment of “Adequate” associated with the Programme;
-- An LSF-Implied Likelihood (LSF-L) of A (low);
-- A two-notch uplift for high recovery prospects;
-- A level of overcollateralisation (OC) of 8.6% to which DBRS Morningstar gives credit, being the minimum observed OC level during the past 12 months, adjusted by a scaling factor of 0.9. DBRS Morningstar gives limited credit to the cash portion of the CP; and
-- 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.

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 covered bonds ratings.

In addition, all else unchanged, the CB ratings would be downgraded if 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 upgrade of the Issuer’s ratings on 14 October 2022 and, in particular, the upgrade on its Long Term COR to A (low) from BBB (high).

Banco BPM acts as the account bank for this transaction. The replacement trigger on Banco BPM in its capacity as account bank is not fully compliant with DBRS Morningstar’s counterparty criteria; hence, DBRS Morningstar gives limited credit to the cash accumulating in the account bank in accordance with its “Rating and Monitoring Covered Bonds” methodology.

The total outstanding amount of OBG is EUR 2.25 billion. As of 31 August 2022, the aggregate balance of the CP was EUR 3.10 billion of residential mortgages plus EUR 259 million of cash collections, resulting in a total OC of 50.2%. However, when considering the reduced credit DBRS Morningstar gives to cash, the resulting net OC amounts to 43.3%.

As of 31 August 2022, the CP comprised 48,018 loans secured by first-rank mortgages originated by Banco Popolare SC group, which merged with Banca Popolare di Milano in January 2017, giving rise to Banco BPM.

The weighted-average current loan-to-value ratio of the mortgages was 46.5% with a seasoning of 11.1 years. The CP was mainly distributed in Lombardy (29.3%), Veneto (13.4%), Emilia Romagna (11.3%), and Tuscany (11.0%).

The CP comprised 26.9% fixed-for-life loans by outstanding balance and 73.1% floating-rate loans. The floating-rate mortgage loans are indexed to different plain-vanilla indices and reset at different dates.

By comparison, 11.1% of the liabilities pay a fixed rate and 88.9% pay a floating rate linked to one- and three-month Euribor plus a spread. The resulting interest and basis risks are considered as unhedged in DBRS Morningstar’s 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 7.4 years, whereas the WAL of the OBG is 1.7 years. The resulting asset-liability maturity mismatch is mitigated by the 12-month maturity extension in case of an Issuer event of default 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” at

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 (17 May 2022).

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 data from 2012 to 2021 for the residential pool; static pool delinquency data from 2013 to 2021 and dynamic pool prepayments data from 2012 to 2021) and stratification information on the CP as of 31 August 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 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 11 February 2022, when DBRS Morningstar confirmed its “A” ratings on the outstanding CB series.

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, Credit Ratings
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 15 February 2016

DBRS Ratings GmbH, Sucursal en España
Paseo de la Castellana 81
Plantas 26 & 27
28046 Madrid, Spain
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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),
-- European RMBS Insight Methodology (28 March 2022) and European RMBS Insight model v,
-- European RMBS Insight: Italian Addendum (29 September 2022),
-- Global Methodology for Rating Banks and Banking Organisations (23 June 2022),
-- Legal Criteria for European Structured Finance Transactions (22 July 2022),
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021),
-- Operational Risk Assessment for European Structured Finance Originators (15 September 2022),
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022),
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022),
-- Global Methodology for Rating Sovereign Governments (29 August 2022),
-- 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].