Morningstar DBRS Reviews the Legal and Structuring Framework Assessment for Italian Covered Bonds

Morningstar DBRS reviewed its Legal and Structuring Framework (LSF) Assessment for some Italian covered bond (CB) programmes and changed it to "Very Strong" from "Adequate", reflecting Morningstar DBRS' update to its "Global Methodology for Rating and Monitoring Covered Bonds" on 13 November 2025 and its credit rating upgrade on the Republic of Italy on 17 October 2025 to A (low) with a Stable trend from BBB (high) with a Positive trend.

The LSF Assessment associated with the Italian CB programmes reflects Morningstar DBRS' view of, among others:

(1) The Italian law (law 130/1999 and circular 285/2013, subsequently completed by the decree 190/2021 and by secondary disposals of the Bank of Italy, respectively) that gives CB holders a preferential right on the cash flows derived from the mortgage credits and loans in the cover pool, as well as those cash flows deriving from the liquidity buffer, cash reserves, substitute assets, and derivative instruments in the cover pool, if any;

(2) The appointment of a special-purpose entity (the guarantor), who purchases the assets in the cover pool and guarantees the satisfaction of the claims of the covered bondholders and any derivative counterparties in case of issuer insolvency or resolution.

(3) The designation of an independent party to monitor the cover pool (cover pool monitor) who is approved by and reports to the Bank of Italy.

(4) The dynamic liquidity buffer to cover temporary liquidity constraints, which the cover pool shall include at all times. This buffer shall cover the net liquidity outflow of the CB programme over the following 180 days. Morningstar DBRS also considers cash reserves covering interests and senior costs existing in some programmes.

(5) The Domicile Sovereign being a jurisdiction, rated A (low) with a Stable trend, for which CBs are a particularly important financing tool.

The change in the LSF Assessment affects the following CB programmes. Although the change itself does not have a direct impact on their current credit ratings, there may be a positive impact in the credit rating analysis.
-- BPER Banca S.p.A. Covered Bonds (OBG - Mortgages - Programme 3) to "Very Strong"
-- Intesa Sanpaolo S.p.A. Covered Bonds (OBG - Mortgages - Programme 2) to "Very Strong"
-- Banca Nazionale del Lavoro S.p.A. Covered Bonds (OBG - Mortgages) to "Very Strong"
-- Unione di Banche Italiane S.p.A. Covered Bonds (OBG - Mortgages - Programme 1) to "Very Strong"

For more information, please see:
-- Italian Obbligazioni Bancarie Garantite Legal and Structuring Framework (17 December 2014), https://dbrs.morningstar.com/research/275023
-- Italian Covered Bonds: Implementation of the New EU Legislation (24 April 2023), https://dbrs.morningstar.com/research/412979
-- DBRS Morningstar's Assessment of European Jurisdictions for which Covered Bonds are Considered Systemically Important (22 February 2023), https://dbrs.morningstar.com/research/410156

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
Credit rating actions on each relevant issuer are likely to have an impact on the credit ratings of the CB outstanding under each programme.
Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis are described separately:
-- For Banca Nazionale del Lavoro S.p.A. Covered Bonds (OBG - Mortgages) at https://dbrs.morningstar.com/issuers/24548
-- For BPER Banca S.p.A. Covered Bonds (OBG - Mortgages - Programme 3) at https://dbrs.morningstar.com/issuers/21214
-- For Intesa Sanpaolo S.p.A. Covered Bonds (OBG - Mortgages - Programme 2) at https://dbrs.morningstar.com/issuers/19818
-- For Unione di Banche Italiane S.p.A. Covered Bonds (OBG - Mortgages - Programme 1) at https://dbrs.morningstar.com/issuers/21103

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the "Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings" (16 May 2025) at https://dbrs.morningstar.com/research/454196.

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