Press Release

DBRS Morningstar Confirms Credit Ratings on Banca Monte dei Paschi di Siena S.p.A. Covered Bonds (OBG – Mortgages Programme 1) at AA

Covered Bonds
August 04, 2023

DBRS Ratings GmbH (DBRS Morningstar) confirmed its credit ratings on the Obbligazioni Bancarie Garantite (OBG; the Italian legislative covered bonds) issued under the Banca Monte dei Paschi di Siena SpA (BMPS or the Issuer) EUR 20.0 billion covered bond programme (BMPS OBG1 or the Programme) guaranteed by MPS Covered Bond S.r.l. (the Guarantor) at AA. The rating action follows the completion of a full review of the Programme.

Concurrently, DBRS Morningstar discontinued its credit rating on Series 25 IT0005349037, which was repaid on 30 June 2023.

As of the date of this press release, there were 11 outstanding series of OBG under the Programme, totalling a nominal amount of EUR 7.7 billion.

The credit ratings are based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of BBB (low), which is the Long Term Critical Obligations Rating of BMPS. BMPS is the Issuer and Reference Entity for the Programme. DBRS Morningstar classifies the Republic of Italy as a jurisdiction in which covered bonds (CBs) are a particularly important funding instrument and deems the cover pool (CP) strategic for the core activity of the Issuer.
-- A Legal and Structuring Framework (LSF) Assessment of “Very Strong” associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of “A”, which is the lowest in line with the assigned LSF-Implied Likelihood (LSF-L).
-- A LSF-L of A (high).
-- A two-notch uplift on the LSF-L for high recovery prospects.
-- A level of overcollateralisation (OC) of 32.3% to which DBRS Morningstar gives credit, which is the minimum level observed in the last 12 months adjusted by a scaling factor of 0.85, and a committed asset percentage of 80.0%, corresponding with a level of committed OC of 25.0%.
-- 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 with 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 the DBRS Morningstar “Global Methodology for Rating and Monitoring Covered Bonds”, DBRS Morningstar did not analyse any forced asset liquidations for this transaction, given the conditional pass-through structure. DBRS Morningstar assumed several prepayment scenarios, ranging between a 1% and a 20% prepayment rate.

Everything else equal, a one-notch downgrade of the CBAP would lead to a two-notch downgrade of the CBs credit rating. In addition, DBRS Morningstar would downgrade the credit ratings if any of the following occurred: (1) the quality of the CP and the level of OC were no longer sufficient to support a two-notch uplift for high recovery prospects; (2) the LSF Assessment associated with the Programme was downgraded to Strong or below; or (3) the CPCA was downgraded below “A”.

BMPS OBG1 features a conditional pass-through structure. If the guarantee is enforced, the Guarantor is not contractually bound to pursue a forced asset sale of the CP in a distressed market environment. Notwithstanding this, the Guarantor can still attempt to liquidate the assets with a view to meeting its payment obligations on the pass-through series and on the earliest maturing CBs. In so doing, the Guarantor shall attempt to maintain the Programme’s OC proportionally to all asset sales. Additionally, the Programme documentation provides for the sale of the assets to take place only if the amortisation test (which sets the OC at a level of at least 75% of the OC resulting from the asset percentage used on the last test calculation date preceding the service of a guarantee enforcement notice) is complied with before and after the sale. If the amortisation test is breached, all series switch to pass-through payment on a pari passu and pro rata basis. DBRS Morningstar did not account for stresses on forced asset sales in its analysis because the Guarantor is not obliged to liquidate the assets.

The Bank of New York Mellon SA/NV - Milan Branch and The Bank of New York Mellon SA/NV - London Branch act as the Italian and English account banks, respectively. DBRS Morningstar considers the risk arising from the exposure to these entities to be consistent with the credit ratings assigned to the OBG, pursuant to DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions". Commingling and set-off risk are mitigated by the computation of such risks in the asset coverage tests.

As of June 2023, the total CP balance included EUR 10.9 billion of mortgages and EUR 256 million of principal receipts. As of the same date, there was EUR 7.7 billion in CBs outstanding under BMPS OBG1 for a total OC of 41.0%, net of commingling and set-off amounts.

As of June 2023, the mortgage CP comprised 144,540 mortgages backed by residential properties located in Italy. All mortgages were originated by either BMPS or affiliated banks.

As of June 2023, the weighted-average (WA) unindexed current loan-to-value ratio of the mortgages was 48.7% with a WA seasoning of 8.0 years. The CP is well distributed across Italy with the highest concentrations in Tuscany (21.1% by outstanding loan balance), Lazio (15.4%), and Lombardy (14.3%).

The CP comprises fixed-rate loans (52.8% by outstanding balance), floating-rate loans (45.5% by outstanding balance), and loans that have the option to switch to either a floating or fixed rate (1.7% by outstanding balance). The floating-rate mortgages are indexed to different plain vanilla bases and reset at different dates.

Approximately 61.0% of OBG notional pays a fixed-rate coupon until the expected maturity and, if the maturity is extended, the relevant series becomes a pass-through series paying, for most of the outstanding series, a floating rate plus a spread on a quarterly basis. DBRS Morningstar considered the interest rate mismatch in its cash flow analysis.

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

As of 30 June 2023, the WA life of the CP was 9.6 years, which is longer than the WA life of 2.0 years of the OBG (calculated as of the date of this press release) when accounting for the expected maturity. This risk is mitigated by the long extendable maturity date, which falls between 33 and 39 years after the expected maturity date.

DBRS Morningstar assessed the LSF related to BMPS OBG1 as “Very Strong” according to its credit rating methodology. For more information, please refer to the DBRS Morningstar commentary “Italian Covered Bonds Legal and Structuring Framework Review”, available at

DBRS Morningstar’s credit ratings on the outstanding CB series address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related interest payment amounts and the related principal amount.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

Credit rating actions on the Issuer are likely to have an impact on this credit rating. ESG factors that have a significant or relevant effect on the credit analysis of the Issuer are discussed separately 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 (4 July 2023),

All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: Global Methodology for Rating and Monitoring Covered Bonds (8 May 2023),

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

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

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 credit 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 credit ratings include loan-by-loan data as of 30 April 2023, static pool default data spanning from 2003 to 2022 and stratification tables provided by the Issuer, and payments reports provided by Banca Finanziaria Internazionale S.p.A.

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

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

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

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

The last credit rating action on this transaction took place on 5 August 2022, when DBRS Morningstar confirmed its credit ratings on the CB series outstanding under the Programme at AA.

Information regarding DBRS Morningstar credit 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: For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see

These credit 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: 3 June 2015

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The credit rating methodologies used in the analysis of this transaction can be found at:

-- Global Methodology for Rating and Monitoring Covered Bonds (08 May 2023)
-- Global Methodology for Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (08 May 2023)
-- European RMBS Insight Methodology (27 March 2023) and European RMBS Insight model v,
-- European RMBS Insight: Italian Addendum (29 September 2022),
-- Global Methodology for Rating Banks and Banking Organisations (22 June 2023),
-- Legal Criteria for European Structured Finance Transactions (30 June 2023),
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022),
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022),
-- Operational Risk Assessment for European Structured Finance Originators (15 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 (4 July 2023),

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