S&P: Ratings On Mediobanca's Mortgage Covered Bonds Affirmed At 'A' And Withdrawn At Issuer's Request
Today's rating actions follow our review of the covered bond program under our relevant criteria (see "Related Criteria").
Covered Bond programs in Italy are subject to the European Union's Bank Recovery and Resolution Directive (BRRD). Our assessment of the systemic importance for mortgage programs in Italy is strong, which under our covered bonds criteria, places the reference rating level (RRL) two notches above the adjusted long-term issuer credit rating (ICR) (see "Assessments For Jurisdictional Support According to Our Covered Bonds Criteria," published on July 20, 2016 and "Covered Bonds Criteria," published on Dec. 9, 2014). This uplift recognizes that resolution regimes like the BRRD increase the probability that an issuer could service its covered bonds even following a default on its senior unsecured obligations. We consider this as an internal form of support because the bail-in of certain issuer creditors does not required direct support from the government. Because the 'BBB-' long-term ICR on Mediobanca does not incorporate any notches of government support, this means that under our covered bonds criteria, we assess the adjusted ICR at 'bbb-' and the RRL at 'bbb+'. Our criteria state that a program can receive up to two notches of jurisdictional uplift when we assess the jurisdictional support as strong. However, no jurisdictional uplift applies to this program as the ratings are constrained by the unsolicited ratings on Italy (BBB-/Stable/A-3).
The available overcollateralization exceeds the target credit enhancement and the program benefits from committed overcollateralization and available liquidity. As a result, the potential collateral-based uplift from the jurisdiction-supported rating level is four notches.
However, according to our criteria for rating single-jurisdiction securitizations above the sovereign, we can rate this program up to four notches higher than our unsolicited long-term rating on Italy. Given our current ratings on Italy, the maximum ratings that the mortgage covered bonds can achieve is 'A'. We have therefore affirmed our ratings at 'A' and subsequently withdrawn them at the issuer's request.
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