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ESG Industry Report Card: Covered Bonds

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ESG Industry Report Card: Covered Bonds

This report explores how environmental, social, and governance (ESG) credit factors influence the credit quality of our rated covered bond programs, including how and why ESG factors may have a more positive or negative influence on an entity's credit quality compared to sector peers or the broader sector.

Analytic Approach

ESG risks and opportunities can affect an entity's capacity to meet its financial commitments in many ways. S&P Global Ratings incorporates these factors into its ratings methodology and analytics, which enables analysts to factor in near-, medium-, and long-term impacts--both qualitative and quantitative--during multiple steps in the credit analysis (see "The Role Of Environmental, Social, And Governance Credit Factors In Our Ratings Analysis," published Sept. 12, 2019). Strong ESG credentials do not necessarily indicate strong creditworthiness.

We define ESG credit factors as ESG risks, or opportunities, that influence an obligor's capacity and willingness to meet its financial commitments. ESG credit factors can influence ratings, rating outlooks, and credit enhancement required for the assigned rating. This influence could be reflected, for example, through reduced ability of the underlying borrowers to repay the cover pool receivables, the value of any collateral, disruptions in servicing or transaction cash flows, financial exposures to transaction counterparties, or increased legal and regulatory risks.

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Our view of ESG risks across covered bond programs are established by analysts during industry portfolio discussions. They are typically qualitative at present, as there are currently limited ESG data points consistently available for collateral pools and other transaction characteristics that could be used to quantify the risk. We support the creation of a core set of reliable ESG metrics for standardized minimum data, because a single standardized disclosure framework to enhance comparability and consistency would facilitate credit analysis and ESG-focused analysis (see "Standardized Non-Financial Disclosures Will Clear The Path For Better ESG Analysis," published on June 19, 2020). In our published rating rationales, we aim to provide more insight and transparency of any ESG credit factors that are material to our credit ratings. For instance, if an ESG credit factor is a primary driver of a rating change, this will be explicitly disclosed in our rationale.

Environmental and social credit factors may affect the quality of the assets in the cover pool and the results of our collateral analysis. If, in our view, an environmental or a social credit factor presents a material risk to the repayment of the rated securities, it could impact the credit enhancement required to achieve a given rating, or potentially constrain the maximum potential rating. However, apart from ESG credit factors that affect the rating on the issuing bank, we would typically not identify any separate environmental or social credit factors for the covered bonds if we are not assigning any collateral-based uplift, as our analysis would be based on other factors such as the issuing bank's credit quality and the analysis of the resolution regime or jurisdictional support. To the extent ESG credit factors affect the rating on the issuing bank, this would be considered separately (see "ESG Industry Report Card: EMEA Banks," published on Feb. 11, 2020).

Governance factors, on the other hand, may affect the uplift that we assign to a program above the issuer credit rating (ICR). A governance credit factor would typically affect either the ratings, the rating outlook, or the number of unused notches. Unused notches are the number of notches the ICR can be lowered by, without resulting in a downgrade of the covered bonds, all else being equal.

Environmental Risk

Currently cover pools are primarily exposed to positive environmental credit factors via mortgage loans granted to increase the underlying property's energy efficiency. However, we generally would only consider the inclusion of these loans in the cover pool as a positive ESG credit factor if higher updated property valuations lead to a decrease in the estimated loss severity and, ultimately, in the credit enhancement required for the rating. On the other hand, we would consider the exposure of the mortgaged properties to climate change and natural disaster risk as a negative credit factor if it leads to a greater credit enhancement to maintain the current rating (see "Future Flooding Represents A Low Risk For U.K. RMBS Ratings," published on March 19, 2020).

We would not necessarily see the issuance of so-called "green" covered bonds as a positive environmental credit factor. We would consider it as such only if the collateral characteristics were less risky, for example because of higher property valuations, than in other comparable pools.

Social Risk

Covered bonds' exposure to social risk largely stems from measures that regulators may impose in order to treat customers fairly, which may include provisions to decrease interest payments or delay property foreclosures. Social benefits include guarantees provided by government-related entities to support underbanked borrowers, such as the "Nationale Hypotheek Garantie" (NHG) loans in the Netherlands, limits to loan-to-value (LTV) ratios, and loans to social housing providers. We also view the funding of hospitals, education buildings, and other essential community facilities as a potential supportive social credit factor, to the extent that this influences an entity's credit quality compared to other comparable assets.

Governance

Governance is an important component of our analytical framework for assessing the rating uplift that we can assign above the ICR. We look at a number of factors, including the originator's underwriting and servicing policies, the quality of the data provided, and the availability of liquidity and overcollateralization (OC) provisions, which would allow us to assign the maximum collateral-based uplift. We would for example identify the lack of liquidity provisions in a legal framework as a governance factor to the extent that it has a negative effect either on the ratings on the program or on the number of unused notches. Some of those issues are systemic and affect all the covered bond programs in a given country, while others are program specific.

ESG Factors In Covered Bonds

ESG Issuer Review: Covered Bonds
Issuer/Rating/Comments Country Analyst
Abanca Corporación Bancaria S.A. (Mortgage Covered Bonds) (AA+/Negative/--)  
ESG considerations are not material rating factors for Abanca's mortgage covered bonds. In terms of governance, we note that the Spanish covered bond legal framework does not require issuers to maintain liquid assets sufficient to cover at least six months' of liquidity needs. However, this does not lead to a reduction in the maximum collateral-based uplift above the jurisdiction-supported rating level for Abanca's mortgage covered bonds because we already limit the number of notches of uplift above the unsolicited long-term sovereign rating on Spain to four. Abanca provides stratified cover pool information, which is less transparent than loan-by-loan information and which results in a higher level of required credit enhancement. This feature is in line with most Spanish covered bond programs we rate. Spain Gómez Grande, María Luisa
Aegon Bank N.V. (Mortgage CPT Covered Bond Program) (AAA/--/--)  
We view Aegon Bank's conditional pass-through (CPT) covered bond program's exposure to social and governance factors as a ratings strength. Most of the mortgage assets benefit from a guarantee provided by the NHG program. This scheme pursues a social goal by supporting underbanked customers, and we consider it credit supportive because it reduces the amount of losses that we size in our credit analysis. On the governance side, we view certain features of Dutch mortgages as credit negative in our analysis. These include the origination of high LTV ratio and interest-only loans. Furthermore, the reset of interest loans with no pre-established rules to determine the new reset interest rates introduces uncertainty around future cash inflows from the cover pool, although the risk is partially mitigated by the fact that the bonds pay fixed interest rates and the servicer is contractually obliged to offer a minimum reset rate on the mortgages. We still consider governance to be overall supportive, given the notes' CPT amortization profile. This feature mitigates refinancing risk, allowing us to de-link the rating on the program from the ICR and reducing the credit enhancement required at each rating level. The Netherlands Escutia, Marta
AIB Mortgage Bank (Mortgage Covered Bonds)(AAA/Stable/--)  
ESG credit factors influence AIB Mortgage Bank's cover pool credit quality in a broadly similar way to other European covered bond issuers we rate. Social factors, especially consumer protection issues, are carefully assessed in Ireland following the financial crises. The Irish central bank imposed certain restrictions on Irish residential mortgage lending since 2015 that included limits in maximum LTV and loan-to-income ratios. We view these measures as positive given that they intend to limit aggressive underwriting standards. On the other hand, AIB Mortgage Bank entered into a swap contract with its parent, Allied Irish Banks PLC (AIB), to hedge interest rates mismatches between cover pool assets and covered bonds. However, the counterparty’s replacement and the collateral posting commitments under the contract are insufficient to support the current rating on the program, which we consider as credit negative by running our analysis on an un-hedged basis. Furthermore, the cover pool includes standard variable rate mortgages, which AIB may change at any time and for a variety of reasons. Although this introduces uncertainty around future cash inflows from the cover pool, we believe that governance factors are overall credit neutral. Ireland Escutia, Marta
Austrian Anadi Bank AG (Mortgage Covered Bond Program)(AA/--/--)  
We consider environmental and social credit factors to have a neutral influence on the credit quality of the bank's cover pool. The cover pool has a certain social aspect through a share of subsidized housing loans (housing corporations) in Carinthia ("Gemeinnütziger Wohnbau"). This exposure carries a lower base default frequency assumption, but as the share in the cover pool is currently small, we consider the effect on the cover pool's credit quality to be negligible. The covered bonds are issued under the Austrian Pfandbriefgesetz (Mortgage Bond Act), which does not require issuers to maintain liquid assets to cover at least 180 days of liquidity needs. Despite the law, we consider the CPT amortization feature supportive of the rating on the covered bonds. This feature mitigates refinancing risk, allowing us to de-link the rating on the covered bonds from the issuer’s creditworthiness and reducing the credit enhancement required at each rating level. In addition, the issuer via the asset cover test, must maintain OC in the program at a level commensurate with the current ratings on the covered bonds. Austria Swiderek, Natalie
AXA Home Loan SFH (French Legislation-Enabled Covered Bond Program)(AAA/Stable/--)  
We consider AXA Home Loan SFH's cover pool exposure to ESG factors as in line with other French issuers we rate. Governance factors consider relevant aspects of the French SFH legislation, which addresses the main requirements of our criteria. The French banking regulator, ACPR, licenses and supervises French SFH issuers. The pool is audited on a quarterly basis by an external asset monitor. The commitment to maintain OC in the program is achieved through an asset coverage test. The bonds' soft-bullet repayment structure mitigates liquidity risk. As both aspects are addressed, the program is eligible for the maximum collateral-based uplift. France Rossi, Adriano
Banco Bilbao Vizcaya Argentaria S.A. (BBVA) (Mortgage Covered Bonds)(AA+/Negative/--)  
Environmental and social factors influence the credit quality of BBVA's cover pool in a broadly similar way as other Spanish covered bond programs that we rate. In terms of cover pool governance, the Spanish covered bond legal framework does not require issuers to maintain liquid assets to cover at least six months of liquidity needs. However, this does not lead to a reduction in the maximum collateral-based uplift above the jurisdiction-supported rating level for BBVA's covered bonds because we already limit the number of notches of uplift above the long-term sovereign rating on Spain to four. In addition, OC in the program is uncommitted, which introduces the risk that the available credit enhancement could decrease below the level required to maintain the current rating on the covered bonds. In our analysis, we reflect this by reducing the maximum collateral-based uplift from four to three notches. BBVA provides stratified cover pool information, which is less transparent than loan-by-loan information and which results in a higher level of required credit enhancement. This feature is in line with most Spanish covered bond programs we rate. We also note that the issuer’s credit quality could be sensitive to governance risk. Some questions around the soundness and effectiveness of the bank's corporate governance emerged over the past year and a half, as the bank has been embroiled in an alleged corporate spying scandal, which the Spanish courts are investigating. Spain Swiderek, Natalie
Bank of Åland PLC (Category FIN Mortgage Covered Bonds) (AAA/Stable/--)  
Environmental and social credit factors influence the credit quality of Bank of Åland's FIN cover pool in a broadly similar way to other Finnish issuers. Bank of Åland has raised its environmental profile but this currently does not affect cover pool credit risk. The issuer currently does not offer specific mortgage products focused on environmental or social factors, which could affect the credit profile. The Finnish government guarantees certain first-time-buyer mortgages, but as we do not consider the guarantee timely, it does not affect the credit analysis. Bank of Åland is committed to maintain a minimum level of OC commensurate with the rating, and six months liquidity is covered by the bonds' soft-bullet repayment structure, which allows for the maximum uplift of the rating under our criteria. The program's governance initiatives support the current rating and the credit enhancement required for the rating. Finland Galdo, Ana
Bank of Åland PLC (Category SWE Mortgage Covered Bonds) (AAA/Stable/--)  
Environmental and social credit factors influence Bank of Åland's SWE cover pool's credit quality in a broadly similar way to other Swedish issuers. The issuer currently does not offer specific mortgage products focused on environment or social factors, which could affect the credit profile. The Swedish cover bond law does not require the coverage of six months liquidity and OC is normally not committed by the issuer. However, Bank of Åland is committed to maintain a minimum level of OC commensurate with the rating, and the bonds' soft-bullet repayment structure covers 180 days liquidity. The program's governance initiatives support the current rating and the credit enhancement required for the rating. Finland Galdo, Ana
Bank of Scotland PLC (Residential Mortgages Covered Bond Program)(AAA/Stable/--)  
ESG considerations are credit neutral for Bank of Scotland's residential mortgages covered bonds. In terms of governance, as a U.K. regulated covered bond program, the Financial Conduct Authority (FCA) verifies periodically its ability to meet its obligations, performs stress tests to monitor OC requirements, and provides approval before the issuer can make any material changes. The pool is also monitored by an external asset monitor. The issuer commits to provide a minimum amount of collateral to meet rating agency requirements, in accordance with the asset coverage test. In addition, we consider liquidity risk to be covered since all outstanding bonds feature soft-bullet maturities. As both aspects are addressed, the program can achieve the maximum potential collateral-based uplift. U.K. Gueranger, Tristan
Bank of Scotland PLC (Social Housing Covered Bond Program)(AAA/Stable/--)  
We consider that social factors are a credit strength for this program backed by loans to social housing associations, given the government support factored into the credit assessment of the underlying obligors. We assess governance as credit neutral: this is a structured covered bond program and is therefore not subject to the U.K. regulated covered bond legislation. However, as is typical for U.K. programs, the issuer commits to provide a minimum amount of collateral to meet rating agency requirements, in accordance with the asset coverage test. In addition, we consider liquidity risk to be covered since all outstanding bonds feature soft-bullet maturities. These features support the highest achievable rating on the covered bonds and reduce the credit enhancement required at each rating level. U.K. Gueranger, Tristan
Bankia S.A. (Mortgage Covered Bonds)(AA/Negative/--)  
Environmental and social credit factors influence Bankia's cover pool credit quality in a broadly similar way as other Spanish covered bond issuers that we rate, while we consider governance factors as being relatively less supportive. Bankia provides stratified cover pool information, which is less transparent than loan-by-loan information and which results in a higher level of required credit enhancement. This feature is in line with most Spanish covered bond programs we rate. The Spanish covered bond legal frameworks lacks liquidity provisions, which we capture limiting the maximum notches of uplift above the sovereign rating. Furthermore, Bankia is not committed to maintain a minimum level of OC in the program, which introduces the risk that the available credit enhancement could decrease in the future to levels that are not commensurate with the current rating, and it reduces the achievable ratings. Spain Escutia, Marta
Bankia S.A. (Public Sector Covered Bonds)(AA-/Negative/--)  
Environmental factors are credit neutral in our analysis of Bankia's public sector cover pool, while we consider social factors to be credit positive in the assessments of the public sector entities included in the cover pool. In terms of governance, we note the Spanish covered bond legal framework does not require issuers to maintain liquid assets to cover at least six months of liquidity needs. However, this does not lead to a reduction in the maximum collateral-based uplift above the jurisdiction-supported rating level for Bankia's public sector covered bonds because we already limit the number of notches of uplift above the long-term sovereign rating on Spain to two. The OC in the program is uncommitted, which introduces the risk that the available credit enhancement could decrease below the level required to maintain the current ratings on the covered bonds. In our analysis, we reflect this by reducing the maximum collateral-based uplift to three notches (from four). While the lack of committed OC does not affect Bankia's public sector covered bond ratings given that the application of our sovereign risk criteria caps the covered bond ratings, it reduces the number of unused notches available to the covered bond program. Spain Swiderek, Natalie
Bankinter S.A. (Mortgage Covered Bonds)(AA+/Negative/--)  
ESG considerations are currently not material factors in determining our ratings on Bankinter's covered bonds. While the Spanish covered bond legal framework does not require issuers to maintain liquid assets sufficient to cover at least six months' of liquidity needs, this does not lead to a reduction in the maximum collateral-based uplift because we already limit the number of notches of uplift above the long-term sovereign rating on Spain to four. Furthermore, Bankinter commits to maintain OC in the program at a level commensurate with the maximum notches of potential collateral-based uplift. Therefore, the covered bonds can achieve the maximum four notch collateral-based uplift above the jurisdiction-supported rating level. Bankinter provides stratified cover pool information, which is less transparent than loan-by-loan information and which results in a higher level of required credit enhancement. However, this feature is in line with most Spanish covered bond programs we rate. Spain Gómez Grande, María Luisa
Barclays Bank UK PLC Global Covered Bond Program (AAA/Stable/--)  
We view ESG credit factors for Barclays' residential mortgages covered bond program as broadly in line with those of its U.K peers. Barclays adheres to the "Help-To-Buy" scheme and there is a small share of first-time buyers in the cover pool. We apply a negative adjustment to the assumed foreclosure frequency of these loans, but only if seasoning is below 18 months, which is the case for most of these loans. Although their presence has a minor negative effect on credit results, our overall assessment is not affected. Regarding governance aspects, as a U.K. regulated covered bond program it is subject to the FCA's periodic verification. The pool is also monitored monthly by an external asset monitor. The issuer commits to provide OC coverage in accordance with the asset coverage test provides OC commitment, and the soft-bullet maturities or the pre-maturity test address liquidity risk. The program can achieve the maximum collateral-based uplift as both aspects are addressed. U.K. Gueranger, Tristan
Bausparkasse Wuestenrot AG (Covered Bonds)(AAA/Stable/--)  
Environmental factors influence the credit quality of Bausparkasse Wuestenrot's cover pool in a broadly similar way as other Austrian mortgage covered bond programs that we rate. Social factors positively influence our ratings on the covered bonds. The business focuses on private savings and residential mortgage lending. The main mortgage product provides borrowers a secure way of obtaining a mortgage by converting savings ("Bausparvertrag") into a mortgage. Combined with a maximum loan size of €220,000 per person, this results in a very granular residential mortgage cover pool. The covered bonds are issued under the Austrian Pfandbriefgesetz (Mortgage Bond Act), which does not require issuers to maintain liquid assets to cover at least 180 days of liquidity needs. This does not affect our ratings on the covered bonds, but reduces the number of unused notches available to the covered bond program. Bausparkasse Wüstenrot commits to maintain a minimum level of OC that is commensurate with a 'AAA' rating. Austria Swiderek, Natalie
Belfius Bank SA/NV (Mortgage Covered Bonds) (AAA/Stable/--)  
The exposure of Belfius' mortgage cover pool to environmental and social factors is in line with other Belgian issuers we rate. Governance aspects take into account the Belgian "pandbrieven" legislation, which addresses the main requirements of our covered bonds criteria. Belgian pandbrieven programs are licensed and supervised by the National Bank of Belgium (NBB) as domestic banking regulator. An external asset monitor, reporting quarterly to the NBB, monitors the pool. Belfius' mortgage covered bonds program does not commit to maintain a minimum level of OC, which reduces by one notch the maximum potential uplift under our criteria. The bonds' soft-bullet maturity profile mitigates liquidity risk. Belgium Rossi, Adriano
Belfius Bank SA/NV (Public Sector Covered Bonds) (AAA/Stable/--)  
We consider social factors in Belfius' public cover pool to be a supportive component in the credit assessments of the underlying entities in public sector pools. In this case, the cover pool comprises loans to Belgian public sector entities to fund investment projects. Environmental factors are aligned with other Belgian issuers we rate. Governance aspects of Belgian pandbrieven programs consider the relevant legislation, which addresses the main features required under our covered bonds criteria. The NBB licenses and supervises these programs. An external asset monitor, reporting quarterly to the NBB, monitors the pool. Belfius' public program does not commit to maintain a minimum level of OC, reducing by one notch the maximum potential uplift under our criteria. The bonds' soft-bullet repayment structure mitigates liquidity risk. Belgium Rossi, Adriano
BNP Paribas Fortis SA/NV (Mortgage Covered Bonds) (AAA/Stable/--)  
Environmental and social considerations are not material factors in determining our ratings on BNP Paribas Fortis's covered bonds. The program's governance aspects are primarily mandated by the Belgian pandbrieven legislation, which reflects the main requirements of our covered bonds criteria. The program, like other Belgian legislation-enabled ones, is licensed and supervised by the NBB as domestic banking regulator. An external asset monitor, reporting quarterly to the NBB, monitors the pool. BNP Paribas Fortis' covered bond program does not commit to maintain a minimum level of OC in the program, which reduces by one notch the maximum potential uplift under our criteria. The bonds' soft-bullet repayment structure mitigates liquidity risk. Belgium Rossi, Adriano
BNP Paribas Home Loan SFH (Mortgage Covered Bond Program) (AAA/Stable/--)  
ESG considerations are not material rating factors for BNP Paribas Home Loan SFH's covered bonds. The program’s governance factors consider the French SFH legislation, which addresses the main features required under our covered bonds criteria. French SFH issuers are licensed and supervised by the French banking regulator, ACPR. The pool is audited on a quarterly basis by an external asset monitor. The commitment to maintain OC in the program is achieved through an asset coverage test. The soft-bullet repayment structure of certain covered bonds and a prematurity test address liquidity risk. These features support the highest achievable rating on the covered bonds and reduce the credit enhancement required at each rating level. France Rossi, Adriano
BPCE SFH (Mortgage Covered Bonds)(AAA/Stable/--)  
We consider environmental factors as potentially positive for BPCE SFH’s cover pool due to the presence of residential loans to energy efficient properties. These loans could result in higher property valuations--and consequently lower LTV ratios--than ordinary properties. Social credit factors influence BPCE SFH’s credit profile in a broadly similar way as most other French covered bond issuers that we rate. Governance factors take into account the relevant legislation, which addresses the main requirements under our covered bonds criteria. French SFH issuers are licensed and supervised by the French banking regulator, ACPR. The pool is audited on a quarterly basis by an external asset monitor. Additionally, BPCE SFH commits to maintain the level of OC commensurate with the current rating. Further, liquidity risk is addressed either through soft bullet maturities or a pre-maturity test. As both aspects are addressed, the program can achieve the maximum collateral-based uplift. France Woelk, Judit
Caisse Francaise de Financement Local (CAFFIL) (Public Sector Covered Bonds)(AA+/Stable/--)  
We consider social factors to be a supportive component in the credit assessments of the public sector entities in CAFFIL's cover pool. These entities--mainly from the French public sector--can only borrow monies to fund investment projects. In this respect, in May 2020 CAFFIL issued the first COVID-19-related social bond, issued under the group's existing social framework with proceeds allocated exclusively to fund loans to French public hospitals. We view CAFFIL's cover pool exposure to environmental factors as being broadly similar to other French issuers we rate. Although CAFFIL has recently enhanced its environmental commitment and in November 2019 issued a green public sector covered bond, this does not currently affect our credit analysis. In terms of governance, we consider the French SCF legislation to address the main features required under our criteria. CAFFIL does not have an OC commitment in place, which implies a loss of one unused notch of collateral-based uplift under our criteria. France Galdo, Ana
CaixaBank S.A. (Mortgage Covered Bonds)(AA/Stable/--)  
Environmental and social credit factors influence the credit quality of CaixaBank's cover pool in a broadly similar way as other Spanish covered bond issuers that we rate, while we consider governance factors as being relatively less supportive. CaixaBank is not committed to maintain a minimum level of OC in the program. This introduces the risk that the credit enhancement could decrease in the future to levels that are not commensurate with the current rating. This results in increased required credit enhancement and lower achievable ratings. Furthermore, the Spanish covered bond legal frameworks lacks liquidity provisions, which we capture limiting the maximum notches of uplift above the sovereign rating. CaixaBank provides stratified cover pool information, which introduces higher uncertainty compared to loan-by-loan information and results in a higher level of required credit enhancement. This feature is in line with most Spanish covered bond programs we rate. Spain Escutia, Marta
Cajamar Caja Rural S.C.C. (Mortgage Covered Bonds)(AA/Negative/--)  
ESG considerations are not material rating factors for Cajamar's mortgage covered bonds. In terms of governance, we note that cover pool information received from Cajamar is loan by loan, which is more transparent than stratified data. We also note the Spanish covered bond legal framework does not require issuers to maintain liquid assets sufficient to cover at least six months of liquidity needs. However, this does not lead to a reduction in the maximum collateral-based uplift above the jurisdiction-supported rating level for Cajamar's covered bonds because we already limit the number of notches of uplift above the long-term sovereign rating on Spain to four. Spain Gómez Grande, María Luisa
Compagnie de Financement Foncier (Mortgage And Public Sector Covered Bonds)(AAA/Stable/A-1+)  
Environmental factors for this program are in line with other French issuers we rate. The cover pool includes both residential loans and public sector exposures, with the latter being the main source of origination of new assets. Residential assets comprise subsidized loans with a social connotation. However, we don’t consider these loans to affect credit results. For public sector exposures we consider social factors to be a supportive component in the credit assessments of the underlying entities. In this case, the cover pool consists mainly of loans to French public sector entities to fund investment projects. In terms of governance we consider the French SCF legislation to address the main requirements of our covered bonds criteria. Compagnie de Financement Foncier has recently provided an OC commitment. These features allow achieving the full four notches of collateral-based uplift. France Rossi, Adriano
Credit Agricole Home Loan SFH Covered Bond Program(AAA/Stable/--)  
We view Credit Agricole Home Loans SFH's cover pool exposure to environmental factors as being potentially credit positive due to the presence of residential loans to energy efficient properties. We expect these loans could result in higher property valuations--and consequently lower LTV ratios--than ordinary properties. The program's exposure to social and governance factors is in line with other French issuers we rate. The cover pool comprises subsidized loans with a social connotation However, we don’t currently consider these loans to have an effect on credit results. Governance factors consider the French SFH legislation, which in our view addresses the main requirements of our covered bonds criteria. French SFHs are licensed and supervised by the French banking regulator, ACPR, and an external asset monitor audits the pool quarterly. The commitment to maintain OC in the program is achieved through an asset coverage test. Finally, the bonds' soft-bullet repayment structure and a prematurity test address liquidity risk. These features allow achieving the full four notches of collateral-based uplift. France Rossi, Adriano
Credit Agricole Public Sector SCF(AAA/Stable/--)  
ESG considerations are currently not material factors for Credit Agricole Public Sector SCF's covered bonds. Governance aspects take into account the French SCF legislation, which addresses the main requirements of our covered bonds criteria. The French banking regulator, ACPR, licenses and supervises French SCF issuers, and the pool is audited quarterly by an external asset monitor. The commitment to maintain OC in the program is achieved through an asset coverage test. The bonds' soft-bullet repayment structure addresses liquidity risk. As both aspects are addressed, the program can achieve the maximum collateral-based uplift. France Rossi, Adriano
Credit Mutuel Home Loan SFH (Legislation-Enabled Covered Bonds Program)(AAA/Stable/--)  
ESG factors influence the credit profile of Credit Mutuel Home Loan SFH's covered bond program in a broadly similar way to that of other French covered bond issuers that we rate. The program is set up under the French SFH legislation, which addresses the main features required under our covered bonds criteria. The French banking regulator, ACPR, licenses and supervises French SFH issuers, and the pool is audited quarterly by an external asset monitor. The issuer commits to maintain the level of OC commensurate with the current rating. Further, liquidity risk is addressed either through soft bullet maturities or the pre-maturity test. These features allow achieving the full four notches of collateral-based uplift. France Woelk, Judit
Danske Bank A/S (Cover Pool C Mortgage Covered Bonds)(AAA/Stable/--)  
Danske Bank's cover pool C exposure to environmental and social factors is in line with other Danish issuers we rate. Danske Bank's cover pool C issues "særligt dækkede obligationer" (SDOs) backed by mainly commercial real estate in Norway and Sweden. SDO programs must ensure continuous LTV compliance on an individual loan basis and not just at origination, meaning that if collateral values drop the issuer must pledge additional assets to the cover pool. On the governance side, the issuer is committed to maintain a minimum level of OC that is below the minimum required for the current ratings. In our analysis, we reflect this by reducing the maximum collateral-based uplift to three notches (from four). We consider liquidity coverage to be covered as all outstanding issues are soft-bullet bonds with a one-year maturity extension. Denmark Andersen, Casper
Danske Bank A/S (Cover Pool D Mortgage Covered Bonds)(AAA/Stable/--)  
Environmental and social credit factors influence the credit profile of Danske Bank's cover pool D covered bond program in a broadly similar way as most other Danish covered bond issuers that we rate. In its cover pool D, Danske Bank issues the covered bonds under the Danish SDO framework backed solely by Danish residential properties. SDO programs must ensure continuous LTV compliance on an individual loan basis and not just at origination, meaning that if collateral values drop the issuer must pledge additional assets to the cover pool. On the governance side, the issuer is committed to maintain a minimum level of OC that is below the minimum required for the current ratings. This leads to a one-notch adjustment to the collateral-based uplift we assign. We consider liquidity coverage to be addressed as all outstanding issues are soft-bullet bonds with a one-year maturity extension. Denmark Hofmann, Andreas
Danske Bank A/S (Cover Pool I Mortgage Covered Bonds)(AAA/Stable/--)  
We view Danske Bank's cover pool I's exposure to environmental and social factors in line with other Danish issuers. In its cover pool I, Danske Bank issues the covered bonds under the Danish SDO framework backed solely by Norwegian and Swedish residential properties. SDO programs must ensure continuous LTV compliance on an individual loan basis and not just at origination, meaning that if collateral values drop the issuer must pledge additional assets to the cover pool. On the governance side, the issuer is committed to maintain a minimum level of OC that is below the minimum required for the current ratings. This leads to a one-notch adjustment to the collateral-based uplift we assign. We consider liquidity coverage to be addressed as all outstanding issues are soft-bullet bonds with a one-year maturity extension. Denmark Hofmann, Andreas
Danske Hypotek AB (Mortgage Covered Bond Program)(AAA/Stable/--)  
We view Danske Hypotek’s covered bond program’s exposure to environmental, social, and governance factors as broadly similar to other Swedish covered bond issuers that we rate. Certain features of the Swedish tax system and market have incentivized the origination of a relatively high proportion of interest-only loans, which we consider as credit negative in our analysis. However, the share of this type of loans declined since 2016, with the introduction of mandatory amortization requirements. We still view governance to be overall credit neutral given that Danske Hypotek is committed to maintain a minimum level of OC commensurate with its target rating on the program (which is as of this report 'AAA') and liquid assets to cover at least 180 days of liquidity needs. This allows the program to reach up to four notches of collateral-based uplift, compared to only two in the case of other Swedish issuers without such commitments. Sweden Escutia, Marta
Danmarks Skibskredit A/S (Capital Center General And Capital Center A)(A/Stable/--)  
There are no environmental or social factors that directly affect our current analysis of the cover pool as we do not assign any collateral-based uplift in the rating. Danmarks Skibskredit is a specialized issuer of covered bonds backed by ship collateral, and benefits from a dedicated Danish law regulating the issuance and cover pool management. Danish Ship Finance is actively engaging with the industry on the sustainability agenda and are integrating ESG elements into their processes. In 2019, they joined "Poseidon Principles" and "Getting to Zero Coalition" to support an industry-wide push for a greener shipping industry. Upholding the match between assets and liabilities leads to a lower OC commensurate with the rating, which would be significantly higher if the matching was not in place. The issuer is not committed to maintain a minimum OC level in the program, which could decrease the bonds' credit enhancement in the future to levels that are not commensurate with the current rating. As we do not assign collateral support, the lack of such commitments does not affect the rating. Denmark Galdo, Ana
Deutsche Apotheker- und Ärztebank eG (Mortgage Covered Bond Program)(AAA/Stable/--)  
Environmental and social credit factors influence the cover pool's credit quality in a broadly similar way as other German covered bond issuers that we rate. We acknowledge the bank’s leading role in lending to businesses and facilitating payment services for the medical sector in Germany. Its core customer groups are self-employed doctors, dentists, and pharmacists, but the bank has increasingly diversified in recent years to medical organizations and hospitals, among others. Under the German Pfandbrief law, 180 days of liquidity needs must be covered by liquid assets. The issuer does not commit to a certain level of OC, which introduces the risk that the available credit enhancement could decrease below the level required to maintain the current rating on the covered bonds. We reflect this in our analysis by reducing the maximum collateral-based uplift above the jurisdiction-supported rating level by one notch. While this does not affect our ratings on Apobank's covered bonds, it reduces the number of unused notches available to the covered bond program. Germany Swiderek, Natalie
DLR Kredit A/S Capital Center B (Mortgage Covered Bonds)(AAA/Stable/--)  
Environmental and social credit factors influence the credit profile of DLR Kredit's capital center B covered bond program in a similar way to other Danish covered bond issuers that we rate. DLR Kredit is one of the leading providers of mortgage financing to Denmark's agriculture industry and most of the loans in the cover pool are to agriculture and commercial clients in Denmark. Environmental factors may affect the valuation of agriculture properties to a higher degree than residential properties. We consider most agriculture assets under our commercial real estate criteria, which considers potential higher levels of asset valuation volatility. In its capital center B, DLR Kredit issues the covered bonds under the Danish SDO framework. SDO programs must ensure continuous LTV compliance on an individual loan basis and not just at origination, meaning that if collateral values drop the issuer must pledge additional assets to the cover pool. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. However, DLR Kredit is not committed to maintain a minimum level of OC in the program, which introduces the risk that the credit enhancement could decrease in the future to levels that are not commensurate with the current rating. This reduces the achievable rating by one notch. We consider governance to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Woelk, Judit
DLR Kredit A/S General Capital Center (Mortgage Covered Bonds)(AAA/Stable/--)  
Environmental and social credit factors influence the credit profile of DLR Kredit's general capital center general in a broadly similar way as most other Danish covered bond issuers that we rate. DLR Kredit is one of the leading providers of mortgage financing to Denmark's agriculture industry. The general capital center's legacy portfolio is about equally split between residential loans and mainly agricultural commercial clients. Environmental factors may affect the valuation of agriculture properties to a higher degree than residential properties. We consider most agriculture assets under our commercial real estate criteria, which considers potential higher levels of asset valuation volatility. In its general capital center, DLR Kredit issued the covered bonds under the Danish "realkreditobligationer" (RO) framework, under which no continuous LTV compliance review is required and current LTVs could be higher than original LTVs. Our credit risk assessment is not affected by the lack of LTV eligibility compliance. Given the portfolio’s legacy nature, average LTV ratios have amortized to fairly low levels. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the OC level required to maintain the current rating on the covered bonds. DLR Kredit is not committed to maintain a minimum level of OC in the program, which introduces the risk that the credit enhancement could decrease in the future to levels that are not commensurate with the current rating. We consider governance to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Woelk, Judit
DNB Boligkreditt AS (Legislation-Enabled Covered Bonds)(AAA/Stable/--)  
Environmental and social credit factors influence the credit quality of DNB Boligkreditt’s cover pool in a broadly similar way to other Norwegian covered bond issuers we rate. DNB Boligkreditt has issued green covered bonds and offers a specific green mortgage product, although take-up of this product has so far remained limited. However, it targets to finance a total of Norwegian krone (NOK) 130 billion of green property developments by 2025. As a major financial institution in Norway, the issuer is exposed to the Norwegian oil sector, although we currently do not consider it to affect the cover pool's credit quality. Some of the outstanding covered bonds have hard-bullet maturities without liquidity mitigants in the cover pool. Therefore, we do not consider 180 days liquidity risk to be covered for the program. Furthermore, DNB Boligkreditt does not commit to maintain a minimum level of OC in the program beyond the minimum legal requirement, which introduces the risk that the credit enhancement could decrease in the future to levels that are not commensurate with the current rating. This currently does not influence the rating we assign but reduces the number of potential notches of uplift. Norway Gueranger, Tristan
DZ Bank AG Deutsche Zentral-Genossenschaftsbank(AA+/Stable/--)  
Our ratings on DZ Bank Briefe's public sector covered bonds reflect the jurisdiction-supported rating level and do not incorporate any collateral-based uplift. Consequently, environmental and social credit factors have a neutral effect on our analysis of DZ Bank’s cover pool. We acknowledge DZ Bank’s key role in the German market for sustainable bonds and note that together with the local cooperative banks, DZ Bank is the largest intermediary for development loans in Germany. A substantial percentage of the cover pool is exposed to the cooperative banking sector, which we consider to comprise a higher credit risk than loans secured by mortgages. The program is governed by a separate law--the "Gesetz zur Umwandlung der Deutschen Genossenschaftsbank" (or DG Bank Umwandlungsgesetz)--which refers directly to the German covered bond law. However, DZ Briefe does not have any regulatory minimum OC requirement above 0% nor a liquidity coverage requirement. The issuer has not committed to hold a minimum level of OC, which allow us to assign a collateral-based uplift, and has made a voluntary commitment to fulfil the liquidity requirements. As we do not give benefit to the collateral in our ratings analysis, we consider governance to have a neutral effect on our rating on the program. Germany Woelk, Judit
DZ Hyp AG (Public Sector Covered Bond Program) (AAA/Stable/--)  
Environmental factors are credit neutral in our analysis of DZ Hyp AG's public sector cover pool, while we consider social factors to be a credit positive in the assessments of the public sector entities included in the cover pool. DZ HYP provides financing to smaller German municipalities to invest in public infrastructure and thereby support the provision of public services. The German covered bond legal framework has a requirement to cover 180 days liquidity. DZ Hyp is not committed to maintain a minimum level of OC in the program, which introduces the risk that the bonds' credit enhancement could decrease in the future to levels that are not commensurate with the current rating. While it does not currently affect our ratings on DZ Hyp’s public sector covered bonds, it reduces the number of unused notches available to the program in the event of an issuer downgrade. Germany Woelk, Judit
DZ Hyp AG (Mortgage Covered Bond Program)(AAA/Stable/--)  
Environmental and social credit factors influence the credit quality of DZ Hyp's mortgage cover pool in a broadly similar way as other German covered bond issuers that we rate. DZ HYP provides financing solutions for energy-efficient commercial real estate, enabling the cooperative, municipal, and church-owned housing companies to provide affordable housing, but we do not consider that the assets affect credit risk to a significant degree. The German Pfandbrief law requires the coverage of 180 days liquidity. DZ Hyp is not committed to maintain a minimum level of OC in the program, which could decrease credit enhancement to levels that are not commensurate with the current rating. While it does not currently affect our ratings on DZ Hyp’s mortgage covered bonds, it reduces the number of unused notches available to the program in the event of an issuer downgrade. Germany Woelk, Judit
Eiendomskreditt AS (EK) (Commercial Mortgage Covered Bonds Program)(AAA/Stable/--)  
ESG credit factors influence the credit quality of EK's cover pool in a broadly similar way to other Norwegian issuers. The issuer does not offer specific ESG themed mortgages and currently we do not see specific environment-related factors affecting our credit analysis. We do not consider the mortgages in the cover pool to be particularly exposed to the Norwegian oil sector. Despite the issuer's part focus on loans backed by multi-family housing and cooperative housing associations, to which we assign lower default assumptions compared to loans backed by commercial property, their volume is not large enough to affect our overall assessment. To manage concentration risk, the issuer has implemented rules aimed at keeping the concentration of the largest borrowers below a certain threshold. All outstanding covered bonds have soft-bullet maturities, and we do not adjust the potential rating due to liquidity risk. Additionally, the program features a public commitment to maintain a level of assets in the cover pool commensurate with the rating. Therefore, it can achieve all four notches of collateral-based uplift. Norway Lanza, Matteo
Eurobank S.A. Mortgage Covered Bond Program III(BBB+/--/--)  
The credit profile of Eurobank's CB III covered bond program is negatively affected by social considerations and positively affected by governance factors, in particular the notes' CPT redemption profile. The legal framework in Greece is less predictable and less supportive to creditor rights than in other European countries. The introduction of foreclosure moratoria in 2010, which incentivized strategic defaulters, weakened Greek borrowers' payment culture. This in turn contributed to the build-up of large, although now declining, stocks of nonperforming loans (NPLs) in the Greek financial sector and forced banks to offer refinancing options. Moreover, mortgage lenders in Greece do not have first priority toward property foreclosure proceeds if the borrower also owns claims toward tax authorities and even unsecured creditors, and are therefore potentially subject to a haircut on recoveries. We consider these factors as negative since they increase the losses in our credit analysis. That said, over the past few years there have been various initiatives to revamp the debtor protection scheme (including the so-called Katseli law, the out-of-court debt workout mechanism, and e-auctions). Furthermore, the government promised to introduce a new single personal insolvency framework to tackle and reduce the backlog of cases burdening the judicial system. We also note that the cover pool features a significant share of Swiss franc denominated mortgage loans, which introduce a currency exchange rate risk for the respective borrowers and negatively affects our credit results. We view the notes' CPT amortization profile as a positive rating factor. This feature mitigates refinancing risk, allowing us to de-link the rating on the program from the ICR and reducing the credit enhancement required at each rating level. Greece Rossi, Adriano
GE SCF S.C.A. Covered Bond Program(AA/Stable/--)  
ESG considerations are not material factors for GE SCF's covered bonds. The program is established under the French SCF legislation, which addresses the main features required under our covered bonds criteria. France Galdo, Ana
HSBC SFH (France) (Mortgage Covered Bonds)(AAA/Stable/--)  
ESG factors influence the credit quality of HSBC SFH (France)'s cover pool in a broadly similar way as other French covered bond programs that we rate. The program is established under the French SFH legislation, which addresses the main features required under our covered bonds criteria. French SFHs are licensed and supervised by the French banking regulator, ACPR, and an external asset monitor audits the pool quarterly. The commitment to maintain OC in the program is achieved through an asset coverage test. Additionally, the soft-bullet repayment structure of certain covered bonds and a prematurity test mitigate liquidity risk. As both aspects are addressed, the program can achieve the full four notches of collateral-based uplift. France Rossi, Adriano
Ibercaja Banco S.A. (Mortgage Covered Bonds)(AA/Negative/--)  
Environmental and social credit factors influence the credit quality of Ibercaja's cover pool in a broadly similar way as other Spanish covered bond programs that we rate, while we consider governance factors as being relatively less supportive. The Spanish covered bond legal framework does not require issuers to maintain liquid assets sufficient to cover at least 180 days of liquidity needs. However, this does not lead to a reduction in the maximum collateral-based uplift above the jurisdiction-supported rating level for the covered bonds because we already limit the number of notches of uplift above the long-term sovereign rating on Spain to four. OC in the program is uncommitted, which introduces the risk that the available credit enhancement could decrease below the level required to maintain the current rating on the covered bonds. Therefore, the lack of committed OC reduces the maximum collateral-based uplift to three notches (from four), which in turn reduces the achievable rating on Ibercaja's covered bonds by one notch. Ibercaja provides stratified cover pool information, which is less transparent than loan-by-loan information and which results in a higher level of required credit enhancement. This feature is in line with most Spanish covered bond programs we rate. Spain Swiderek, Natalie
ING Bank N.V. Soft-Bullet Covered Bond Program and ING Bank N.V. Hard- and Soft Bullet Covered Bond Program(AAA/Stable/--)  
Social factors have a positive influence on our ratings on both of ING Bank's covered bond programs. Both cover pools include mortgage loans that benefit from a guarantee provided by the NHG program. This scheme pursues a social goal by supporting underbanked customers, and we consider it as credit supportive because it reduces the amount of losses that we size in our analysis. The effect of environmental factors is in line with other Dutch issuers we rate. In terms of governance, certain features of the Dutch tax system have incentivized the origination of high LTV and interest-only loans, which we consider as credit negative in our analysis. That said, ING Bank commits to maintain the level of OC in the program commensurate with the current rating. Further, the soft-bullet repayment structure and pre-amortization tests mitigate liquidity risk. These features allow achieving the full four notches of collateral-based uplift. The Netherlands Woelk, Judit
Jyske Realkredit A/S (Capital Center B Mortgage Covered Bonds)(AAA/Stable/--)  
Environmental and social credit factors influence the capital center B covered bond program's credit profile in a similar way as most other Danish covered bond issuers that we rate. In this capital center, Jyske Realkredit issues the covered bonds under the Danish RO framework, which doesn't require continuous LTV compliance review. Under this framework, current LTVs can be higher than original LTVs. The lack of LTV eligibility compliance and the fact that the capital center includes loans secured by subsidized housing, don't affect our credit risk assessment. The center is inactive and therefore not originating new assets in its portfolio. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum level of OC in the program, which introduces the risk that the credit enhancement could decrease in the future to levels that are not commensurate with the current rating. Therefore, we consider overall governance to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Woelk, Judit
Jyske Realkredit A/S (Capital Center E Mortgage Covered Bonds)(AAA/Stable/--)  
Environmental and social credit factors influence the Capital Center’s credit profile in a broadly similar way as most other Danish covered bond issuers that we rate. The issuer publishes the Sustainable Transparency Template quarterly, but this currently does not affect our view of credit risk. In its most active capital center, capital center E, Jyske Realkredit issues the covered bonds under the Danish SDO framework, which requires continuous LTV compliance and additional collateral must be added to the cover pool if current LTVs are higher than regulatory LTV limits. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum level of OC in the program, which introduces the risk that the credit enhancement could decrease in the future to levels that are not commensurate with the current rating. Therefore, we view overall governance factors to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Woelk, Judit
Jyske Realkredit A/S (General Capital Center Mortgage Covered Bonds)(AAA/Stable/--)  
Environmental factors influence the general capital center’s credit profile in a similar way to most Danish rated covered bonds. We consider social factors to positively affect the rating as most of the assets in this cover pool are loans backed by subsidized housing, which provide affordable housing for the general population and which benefit from guarantees from the public sector. In our credit risk analysis, we consider these loans to have lower risk and higher recoveries compared to residential mortgage assets. Jyske Realkredit issues the covered bonds under the Danish RO framework, which doesn't require continuous LTV compliance review and which allows current LTVs to be higher than original LTVs. Our credit risk assessment is not affected by the lack of LTV eligibility compliance. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the OC level required to maintain the current ratings on the covered bonds. Jyske Realkredit is not committed to maintain a minimum OC level in the program, which introduces the risk that the credit enhancement could decrease in the future to levels that are not commensurate with the current rating. We consider governance factors to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Woelk, Judit
KA Finanz AG (Public Sector Covered Bonds)(AA+/Stable/--)  
Our ratings on KA Finanz's public sector covered bonds reflect the jurisdiction-supported rating level and do not incorporate any collateral-based uplift. Consequently, we consider that environmental and social credit factors have a neutral effect on the cover pool's credit quality. The fully state-owned issuer is operating as a nonbank and wind-down entity. The program is governed by the Austrian law on secured bank bonds ("Gesetz betreffend fundierte Bankschuldverschreibungen"), a legal framework that does not include liquidity provisions. Further, KA Finanz does not publicly commit to hold OC to support any collateral-based uplift. We generally consider the lack of these factors to limit the number of potential collateral-based notches of uplift in the rating. However, as we do not give benefit to the collateral in our ratings analysis, we consider governance to have a neutral effect on our rating on the program. Austria Woelk, Judit
Kommunalkredit Austria AG (Public Sector Covered Bonds)(A/Negative/--)  
The rating on Kommunalkredit Austria's public sector covered bonds is based on the jurisdiction-supported rating level. Therefore, we do not identify any environmental and social credit factors from the cover pool itself. We acknowledge that ESG factors are enshrined in Kommunalkredit Austria's business model. Being a specialist bank it engages in infrastructure and energy financing in Europe and internationally, providing project structuring and financing services in the areas of social infrastructure and communications technology. It is also active in the areas of energy and environment, transport, and natural resources. We also note that Kommunalkredit Austria was the first Austrian Bank to issue a social covered bond (€300 million) with the proceeds used to finance the educational sector, social housing, and the health sector, with some of these loans being part of its public sector covered pool. Kommunalkredit Austria has committed to maintain OC of at least 10% for its covered bonds, which is below the level for any collateral-based uplift. That said, the Austrian Law on secured bank bonds, under which the bonds are issued, lacks liquidity provisions, which would limit the maximum collateral-based uplift above the jurisdiction-supported rating level. However, given that we don’t assign any collateral-based uplift to Kommunalkredit Austria's covered bond program, we consider governance factors to have a neutral effect on our rating on the program. Austria Swiderek, Natalie
Kookmin Bank US$7 Billion Global Covered Bond Program(AAA/Stable/--)  
The cover pool's exposure to ESG factors is in line with the industry and other domestic peers. We do not see any environmental factor that currently affect our analysis of Kookmin Bank's cover pool. At the issuer level, we believe ESG credit factors do not influence Kookmin Bank's credit quality more, or less, than they do for its industry and domestic peers and the bank's governance is on par with that of major peers in Korea. We expect Kookmin Bank to focus on improving its governance structure by reinforcing the management appointment procedure, strengthening internal controls, and improving its board of directors' independence and diversity. The program has a contractual OC commitment commensurate with our rating. Extendable maturity for soft-bullet bonds and pre-maturity test for hard-bullet bonds mitigate liquidity risk. Currently, only soft-bullet covered bonds have been issued. Republic of Korea Tao, Yalan
Korea Housing Finance Corp. (KHFC) Social Covered Bonds(AAA/Stable/--)  
We consider the social factor is relatively strong in the global context, considering KHFC is a state-run agency with a mandate and social responsibilities to provide affordable housing on a long-term and sustainable basis. Committed to serving low- and middle-income families, KHFC has wide-ranging housing finance operations including the supply of policy loan and other housing related operations. The government is legally obligated to maintain KHFC's solvency in accordance with Article 51 of the KHFC Act. KHFC developed the KHFC Social Covered Bond Framework in 2018 and renamed it the Social Financing Framework, under which it will issue social covered bonds and use the proceeds under the affordable housing eligibility category. The program has a contractual commitment to maintain minimum OC commensurate with our rating. We note that the program does not benefit from liquidity support but this does not affect our ratings on the covered bonds. We do not see any environmental factor that could affect our analysis of KHFC's cover pool. Republic of Korea Tao, Yalan
Kutxabank S.A. (Mortgage Covered Bonds)(AA+/Negative/--)  
Environmental and social credit factors influence the credit quality of Kutxabank's cover pool in a broadly similar way as other Spanish mortgage covered bond programs that we rate. We note that Kutxabank is a strong supporter of social housing, providing loans under state and regional "Vivienda de Protección Oficial" programs for two decades and supporting individuals and families in their pursuit of affordable permanent housing. In September 2015, it issued a €1 billion social covered bond--the first from a Spanish financial institution--aimed at financing lending activities that support low-income individuals and families without access to adequate accommodation. In terms of governance, we note that the Spanish covered bond framework does not require issuers to maintain liquid assets to cover at least 180 days of liquidity needs. However, this does not lead to a reduction in the maximum collateral-based uplift above the jurisdiction-supported rating level for Kutxabank's covered bonds because we already limit the number of notches of uplift above the long-term sovereign rating on Spain. Furthermore, Kutxabank commits to maintain OC in the program at a level commensurate with the maximum notches of potential collateral-based uplift. Therefore, the covered bonds can achieve the maximum four notch collateral-based uplift above the jurisdiction-supported rating level. Kutxabank provides stratified cover pool information, which is less transparent than loan-by-loan information and which results in a higher level of required credit enhancement. This feature is in line with most Spanish covered bond programs we rate. Spain Swiderek, Natalie
La Banque Postale Home Loan SFH(AAA/Stable/--)  
ESG factors influence La Banque Postale's Home Loan SFH covered bond program’s credit profile in a broadly similar way to that of other French covered bond issuers that we rate. The cover pool comprises a significant share of subsidized loans, which have a social connotation, but we don’t currently consider these to have a material effect on credit results. Governance considerations take into account the French SFH legislation, which addresses the main requirements under our covered bonds criteria. French SFHs are licensed and supervised by the French banking regulator, ACPR, and an external asset monitor audits the pool quarterly. The program features a commitment to maintain OC, although unlike most other French programs we rate, the commitment is capped at a fixed level. We consider liquidity risk to be covered through the provisions of the SFH legislation. Thanks to the combination of these two factors, the program can benefit from the full four notches of collateral-based uplift. France Rossi, Adriano
Landshypotek Bank AB (Mortgage Covered Bonds)(AAA/Stable/A-1+)  
Environmental factors influence our view of Landhypotek's cover pool's credit quality to a somewhat higher extent than other Swedish issuers due to the lender's focus on green mortgage assets, in particular mortgages secured by forestry assets. The issuer has successfully issued green covered bonds and publishes third-party environmental impact reports. We consider these forestry assets to be comparable to commercial credits, which results in higher credit risk assumptions. The issuance of green covered bonds likely diversifies the investor base and may lead to lower cost of funding, but it currently does not affect the target credit enhancement, and we consider it neutral to the rating. Social factors do not currently affect the cover pool's credit risk. Historically, long mortgage maturities increase the program's target credit enhancement. Certain features of the Swedish tax system and market have incentivized the origination of a relatively high proportion of interest-only loans, which we consider as credit negative in our analysis. However, the share of this type of loans declined since 2016, with the introduction of mandatory amortization requirements. The program issues hard bullet covered bonds and relies on the bank to manage liquidity risk. The lack of OC commitments beyond the Swedish covered bond law's minimum introduces the risk that the available credit enhancement could decrease below a level required to maintain the current ratings on the covered bonds. Due to the lack of OC and liquidity commitments, we reduced the maximum achievable uplift to two from four notches. Sweden Andersen, Casper
Lansforsakringar Hypotek AB (publ) (Mortgage Covered Bond Program)(AAA/Stable/A-1+)  
Lansforsakringar's covered bond program is exposed to social and environmental factors in a broadly similar way as most other Swedish covered bond issuers. The bank is committed to its sustainability duties and publishes detailed reports about its ESG goals and commitments. The bank’s cooperative profile means that the mortgage lending activity is not exclusively focused on profit maximization. The issuer currently does not offer specific environmental or social themed mortgage products and we do not consider these factors to influence cover pool's credit risk. Certain features of the Swedish tax system and market have incentivized the origination of a relatively high proportion of interest-only loans, which we consider as credit negative in our analysis. However, the share of this type of loans declined since 2016, with the introduction of mandatory amortization requirements. The issuer is committed to maintain a 10% minimum level of OC in the program, which is sufficient to cover the overcollateralization commensurate with the current rating. Therefore, we do not deduct a notch to the collateral-based uplift due to uncommitted OC. The program issues hard bullet covered bonds and relies on the bank to manage liquidity risk in the cover pool. Due to the lack of liquidity commitment, we reduce the maximum achievable uplift to three notches from four. Sweden Hofmann, Andreas
MMB SCF(AAA/Negative/--)  
We view MMB SCF's cover pool exposure to ESG factors as in line with the other French issuers we rate. In terms of governance, the program is documented under the French SCF legislation, which addresses the main features required under our criteria. The French banking regulator, ACPR, licenses and supervises French SCF issuers, and the pool is audited quarterly by an external asset monitor. The commitment to maintain OC in the program is achieved through an asset coverage test and the bonds' soft-bullet repayment structure addresses liquidity risk. These features allow achieving the full four notches of collateral-based uplift. France Galdo, Ana
Mortgage Society of Finland (Mortgage Covered Bond Program)(AAA/Negative/--)  
ESG credit factors influence the credit quality of The Mortgage Society of Finland's cover pool in a broadly similar way as other Finnish covered bond programs that we rate. The issuer currently does not offer specific mortgage products focused on environment or social factors, which could affect the credit results. The Finnish government guarantees certain first-time-buyer mortgages, but as we do not consider the guarantee timely, it does not affect the credit analysis. The Mortgage Society of Finland is committed to maintain a minimum level of OC in the program commensurate with the rating. Additionally, the bonds' soft-bullet repayment structure mitigates 180 days of liquidity risk. Both governance initiatives support the current ratings and credit enhancement required for the rating. Finland Swiderek, Natalie
National Bank of Greece S.A. (NBG) Mortgage Covered Bond Programs I And II(BBB+/--/--)  
We consider the credit profile of NBG's covered bond programs to be negatively affected by social considerations and positively affected by the notes' CPT redemption profile. Greece's legal framework is less predictable and less supportive to creditor rights than in other European countries. The introduction of foreclosure moratoria, which incentivized strategic defaulters, weakened Greek borrowers' payment culture. This in turn contributed to the build-up of large, although now declining, stocks of NPLs in the Greek financial sector and forced banks to offer refinancing options that included significant haircuts to loan amounts. Moreover, mortgage lenders in Greece do not have first priority toward property foreclosure proceeds if the borrower also owns claims towards tax authorities, and are consequently potentially subject to recoveries haircuts. We consider these factors as negative since they increase the losses in our credit analysis. We acknowledge the fact that over the past few years there have been various initiatives to revamp the debtor protection scheme (including the so-called Katseli law, the out-of-court debt workout mechanism, and e-auctions). Furthermore, the government promised to introduce a new single personal insolvency framework to tackle and reduce the backlog of cases burdening the judicial system. We view the notes' CPT amortization profile as a positive ratings factor. This feature mitigates the refinancing risk, allowing us to de-link the rating on the program from the ICR, and reduces the credit enhancement required at each rating level. Greece Escutia, Marta
Nationwide Building Society Global Covered Bond Program(AAA/Stable/--)  
Nationwide Building Society’s covered bond program's exposure to ESG factors is in line with other U.K. issuers we rate. The issuer adheres to the U.K. government's "Help-To-Buy" scheme, aimed at providing favorable conditions to first-time buyers. The cover pool includes a small amount of loans originated through this initiative, which in our view present an increased credit risk, given their lower refinancing opportunities. However, given this loan type's minor share, our overall assessment is not affected. Regarding governance, as a U.K. regulated covered bond program, it is regulated and monitored by the FCA. A monthly asset coverage test is carried out to ensure that the bonds are sufficiently overcollateralized. We consider liquidity risk to be covered, given that all outstanding bonds present soft-bullet maturities. These features support the highest achievable collateral-based uplift of four notches. U.K. Lanza, Matteo
NIBC Bank N.V. Mortgage Covered Bond Program(AAA/--/--)  
We view social and governance factors as positively influencing the credit quality of NIBC's covered bond program. The cover pool includes mortgages that benefit from a guarantee provided by the NHG program. This scheme pursues a social goal by supporting underbanked customers, and we consider it as credit supportive because it reduces the amount of losses that we size in our analysis. On the other hand, certain features of the Dutch tax system have incentivized the origination of high LTV and interest-only loans, which we consider as credit negative in our analysis. Furthermore, resetting interest loans with no pre-established rules to determine the new reset interest rates are common in the Netherlands. Although this introduces uncertainty regarding future cash inflows from the cover pool, the risk is partially mitigated by the fact that the bonds pay fixed interest rates and the servicer is contractually obliged to offer a minimum reset rate on the mortgages. We still consider governance to be overall supportive, given the notes' CPT amortization profile. This feature mitigates refinancing risk, allowing us to de-link the rating on the program from the ICR, and reducing the credit enhancement required at each rating level. The Netherlands Escutia, Marta
NN Bank N.V. (Mortgage CPT Covered Bond Program)(AAA/--/--)  
Social and governance factors positively influence the credit profile of NN Bank's CPT covered bond program. We consider governance to be overall supportive, even if certain features of the Dutch tax system have incentivized the origination of high LTV and interest-only loans. Furthermore, the interest rate on the loans is reset with no pre-established rules, introducing certain uncertainty regarding future cash inflows from the cover pool. This risk is partially mitigated by the fact that the bonds pay fixed interest rates and the servicer is contractually obliged to offer a minimum reset rate on the mortgages. On the other side, the bonds' amortization profile mitigates refinancing risk, allowing us to de-link the rating on the program from the ICR, which in turn reduces the credit enhancement required at each rating level. On the social side, part of the mortgages in the cover pool benefit from a guarantee provided by the NHG program. This scheme pursues a social goal by supporting underbanked customers, and we consider it as credit supportive because it reduces the amount of losses that we size in our credit analysis. The Netherlands Escutia, Marta
NN Bank N.V. (Soft-Bullet Mortgage Covered Bond Program)(AAA/Stable/--)  
We consider the inclusion of NHG loans in NN Bank's soft bullet program's cover pool as having a positive influence on its rating quality. The NHG program pursues a social goal by supporting underbanked customers, and we consider it as credit supportive because it reduces the amount of losses that we size in our analysis. On the other hand, certain features of the Dutch tax system have incentivized the origination of high LTV and interest-only loans, which we consider as credit negative in our analysis. Furthermore, resetting interest loans with no pre-established rules to determine the new reset interest rates are common in the Netherlands. Although this introduces uncertainty regarding future cash inflows from the cover pool, the risk is partially mitigated by the fact that the servicer is contractually obliged to offer a minimum reset rate on the mortgages and the bonds pay fixed interest rates. NN Bank commits to a level of OC commensurate with the current rating, and the soft-bullet repayment structure partially mitigates refinancing risk, allowing the program to achieve four notches of potential collateral-based uplift. The Netherlands Escutia, Marta
Nordea Direct Boligkreditt AS (NDB) (Mortgage Covered Bonds Program)(AAA/Stable/--)  
Environmental and social credit factors influence the credit quality of NDB's cover pool in a broadly similar way to other Norwegian covered bond issuers that we rate. The issuer does not offer a green mortgage product. With a relatively low share of assets located in the West region, we do not consider the cover pool to be particularly exposed to the Norwegian oil sector, which could affect the credit analysis. All outstanding covered bonds present soft-bullet maturities, which we consider to mitigate 180 days liquidity. Additionally, the issuer has publicly committed to maintain a level of OC in the cover pool commensurate with the rating. The combination of these two governance factors allows the program to achieve all four notches of collateral-based uplift. Norway Gueranger, Tristan
Nordea Kredit Realkredit A/S (Capital Center 1 Mortgage Covered Bonds)(AAA/Stable/--)  
We view Nordea Kredit's capital center 1's cover pool exposure to ESG factors in line with other Danish issuers. Currently, we do not see any environmental factors that directly affect our analysis of the cover pool. The capital center 1 bonds issued were ROs without continuous LTV surveillance. Capital Center 1 is not actively issuing covered bonds, which has led to some concentration in agricultural mortgage loans with higher credit risk than residential mortgages. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum OC level in the program, which could decrease the bonds' credit enhancement in the future to levels that are not commensurate with the current rating. We consider governance factors to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Galdo, Ana
Nordea Kredit Realkredit A/S (Capital Center 2 Mortgage Covered Bonds)(AAA/Stable/--)  
Nordea Kredit's capital center 2's cover pool exposure to ESG factors is in line with other Danish issuers. There are no environmental factors directly affecting our analysis of the cover pool. Although the issuer does not offer a dedicated green mortgage product, it established its "Green Bond" framework and successfully issued its first senior unsecured green bond in 2019. Capital center 2, the active center, issues "saerligt daekkede realkreditobligationer" (SDROs) with continuous LTV surveillance. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum OC level in the program, which could decrease the bond's credit enhancement in the future to levels that are not commensurate with the current rating. We consider governance factors to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Galdo, Ana
NRW.BANK Public Sector Covered Bond Program(AAA/Stable/--)  
We consider that environmental and social credit factors have a neutral effect on the credit quality of NRW.BANKS's cover pool. The cover pool was established before NRW.BANK acquired its status as a state development bank in 2004, with its sole owner being the German state of North Rhine-Westphalia. NRW.Bank is orderly winding down the program with no covered bond issuance since 2004. The governing law is the "Gesetz über die Pfandbriefe und verwandten Schuldverschreibungen öffentlich-rechtlicher Kreditanstalten- ÖPG". Under the law, the issuer is not required to hold liquid assets to cover at least 180 days of liquidity needs. Additionally, NRW.BANK does not commit to any specific level of OC. While this does not affect our rating on NRW.BANK's covered bonds, it reduces the number of unused notches available in the program. Germany Swiderek, Natalie
Nykredit Realkredit A/S (Capital Center C Mortgage Covered Bonds)(AAA/Stable/--)  
Environmental and governance factors influence the credit profile of Nykredit Realkredit's capital center C covered bond program in a broadly similar way as most other Danish covered bond issuers that we rate, while we consider social factors as credit supportive. The cover pool mainly comprises Danish residential and commercial properties, and includes loans backed by subsidized homes. Subsidized housing providers in Denmark are non-profit associations set up to ensure affordable housing for the general population. In our analysis, we apply a higher recovery rate on guaranteed loans than on unguaranteed ones, giving benefit to the presence of a guarantor, usually either the Danish state or a municipality. In its capital center C, Nykredit Realkredit issues the covered bonds under the Danish RO framework without continuous LTV surveillance, which currently does not affect the credit assessment. The center is currently inactive and therefore not originating new assets in its portfolio. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum level of OC in the program, which could decrease the covered bonds' credit enhancement in the future to levels that are not commensurate with the current rating. We consider governance factors to have an overall neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Woelk, Judit
Nykredit Realkredit A/S (Capital Center D Mortgage Covered Bonds)(AAA/Stable/--)  
ESG factors influence the credit profile of Nykredit Realkredit's capital center D covered bond program in a broadly similar way as most other Danish covered bond issuers that we rate. Nykredit Realkredit issued the capital center D covered bonds under the Danish RO framework, without continuous LTV surveillance. The center is currently inactive and therefore not originating new assets in its portfolio. This has resulted in a reduction of the residential mortgages, leading to a higher percentage of commercial mortgage loans, which we consider to be comparably more risky. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum level of OC in the program, which could decrease the credit enhancement in the future to levels that are not commensurate with the current rating. We consider governance factors to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Galdo, Ana
Nykredit Realkredit A/S (Capital Center E Mortgage Covered Bonds)(AAA/Stable/--)  
ESG factors influence the credit profile of Nykredit Realkredit's capital center E covered bond program in a broadly similar way as most other Danish covered bond issuers that we rate. Nykredit Realkredit issues the capital center E covered bonds under the Danish SDO framework. More than 80% of the portfolio are residential loans. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum level of OC in the program, which could decrease credit enhancement in the future to levels that are not commensurate with the current rating. We consider governance to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Galdo, Ana
Nykredit Realkredit A/S (Capital Center G Mortgage Covered Bonds)(AAA/Stable/--)  
ESG factors influence Nykredit Realkredit's capital center G covered bond program’s credit profile in a broadly similar way as most other Danish covered bond issuers that we rate. Although the issuer does not offer a specific green mortgage product, it established its "Green Bond" framework and successfully issued its first green bonds in 2019 from capital center G. The capital center has a high percentage of commercial mortgages and buy-to-let mortgages. We consider both buy-to-let and commercial mortgages as riskier in our credit assessment. Nykredit Realkredit issues the capital center G covered bonds under the Danish RO framework, without continuous LTV surveillance. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum OC level in the program, which could decrease the bonds' credit enhancement in the future to levels that are not commensurate with the current rating. We consider governance factors to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Galdo, Ana
Nykredit Realkredit A/S (Capital Center H Mortgage Covered Bonds)(AAA/Stable/--)  
ESG factors influence Nykredit Realkredit's capital center H covered bond program's credit profile in a broadly similar way as most other Danish covered bond issuers that we rate. Despite not offering a specific green mortgage product, the issuer established its "Green Bond" framework and successfully issued its first green bonds in 2019 from capital center H. The capital center H covered bonds are issued under the Danish SDO framework, with continuous LTV surveillance. Due to past governance of the program, the capital center comprises mainly 1st ranking residential mortgage loans, which generally improves the credit assessment. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum OC level in the program, which could decrease the bonds' credit enhancement in the future to levels that are not commensurate with the current rating. We consider governance factors to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Galdo, Ana
Nykredit Realkredit A/S (Capital Center I Mortgage Covered Bonds)(AAA/Stable/--)  
ESG factors influence the credit profile of Nykredit Realkredit's capital center I covered bond program in a broadly similar way as most other Danish covered bond issuers that we rate. The capital center I covered bonds are issued under the Danish RO framework, without continuous LTV surveillance. The capital center has a high percentage of commercial loans, which we consider to have higher risk than residential loans. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum OC level in the program, which could decrease the bonds' credit enhancement in the future to levels that are not commensurate with the current rating. We consider governance factors to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Galdo, Ana
Nykredit Realkredit A/S (General Capital Center Mortgage Covered Bonds)(AAA/Stable/--)  
ESG factors influence the credit profile of Nykredit Realkredit's general capital center's covered bond program in a broadly similar way as most other Danish covered bond issuers that we rate. The mortgage pool mainly comprises Danish residential and commercial properties, and includes loans backed by subsidized housing. Additionally, the cover pool includes a high portion of substitute assets. The general center's covered bonds were issued under the Danish RO framework, without continuous LTV surveillance. Although the general capital center is currently not actively issuing bonds, it must remain open for issuance for other capital centers to remain active, and is also the capital center for any excess funds from other Nykredit Realkredit capital centers. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum OC level in the program, which could decrease the bonds' credit enhancement in the future to levels that are not commensurate with the current rating. We consider governance factors to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Galdo, Ana
Oberbank AG (Mortgage Covered Bond Program)(AAA/Stable/--)  
We consider environmental and social credit factors to affect the ratings on Oberbank's covered bonds in a broadly similar way as other Austrian mortgage covered bond programs that we rate. The bank has implemented a sustainability strategy with set goals until 2022 that also include an expansion of a sustainable product range. The Austrian Law on secured bank bonds, under which the bonds are issued, lacks liquidity provisions. Furthermore, OC in the program is uncommitted, which introduces the risk that the available credit enhancement could decrease below a level required to maintain the current rating on the covered bonds. As the issuer achieves the rating without using notches that require committed OC and liquidity provisions, governance does not affect our ratings on the covered bonds, but reduces the number of unused notches. Austria Swiderek, Natalie
Oberoesterreichische Landesbank AG(AA+/Stable/--)  
Our rating on Hypo OOE's mortgage covered bonds do not incorporate any collateral-based uplift. Consequently, we consider that environmental and social credit factors have a neutral effect on the analysis of Hypo OOE’s cover pool. The social angle of the bank's market leadership in Upper Austria's cooperative housing development, its support for first-time buyers, and the low LTV ratios in the residential loan portfolio are potential credit positive factors. The program is governed by the Austrian covered bond law ("Pfandbriefgesetz"), a legal framework that lacks liquidity provisions. We generally adjust the maximum achievable uplift for covered bonds issued under this framework due to the absence of liquidity provision. This factor does not affect Hypo OOE’s covered bonds because the program does not make use of any collateral-based uplift. Hypo OOE is committed to maintain OC in the program that is commensurate with the current rating. We reflect this commitment in the stable outlook on the current rating. Austria Woelk, Judit
Oesterreichische Kontrollbank AG (OKB) (Covered Bonds)(AA+/Stable/--)  
Our ratings on OKB's public sector covered bonds reflect the rating on the Austrian sovereign and do not incorporate any collateral-based uplift. Consequently, we consider that environmental and social credit factors have a neutral effect on our analysis of OKB's cover pool. We acknowledge that OKB is the export-financing arm of the Austrian sovereign and supports the government's sustainability goals. Thereby, OKB has a strong focus on ESG factors already considered within the sovereign rating. The program is governed by the Austrian Law on secured bank bonds, a legal framework that lacks liquidity provisions. Further, OKB does not publicly commit to hold OC above the legal minimum. Both limit the number of potential collateral-based notches of uplift. However, given that OKB's covered bond program does not make use of any collateral-based uplift, we consider governance factors to have a neutral effect on our rating on the program. Austria Woelk, Judit
OMA Bank Savings Bank PLC (Mortgage Covered Bond Program)(AAA/Stable/--)  
Environmental factors influence the credit quality of OMA Bank's cover pool in a broadly similar way to other Finnish issuers. The issuer currently does not offer a green mortgage product. Loans to housing associations, a potential social factor, make up a limited percentage of the cover pool. Although the Finnish government guarantees certain first-time-buyer mortgages, although as we do not consider the guarantee timely, it does not affect the credit analysis. OMA Bank issues covered bonds with soft bullet features, and is committed to maintain a minimum level of OC in the program commensurate with the assigned rating. Therefore, we do not reduce the maximum uplift, which supports the assigned rating on the covered bonds. Finland Andersen, Casper
OP Mortgage Bank (OPMB) (Mortgage Covered Bonds)(AAA/Stable/--)  
Environmental and social credit factors influence OP's cover pool credit quality in a broadly similar way as other Finnish covered bond issuers that we rate. OP Mortgage Bank forms part of the wider OP Financial Group, which comprises 138 member cooperative banks and is owned by two million owner-customers. Although the group is committed to promoting sustainable finance in Finland, OP Financial Group does not currently offer residential mortgage products of a particular social or green nature. The Finnish government guarantees certain first-time-buyer mortgages, although it does not affect our analysis since we do not consider the guarantee timely. OP Mortgage Bank issues soft-bullet covered bonds, which mitigate liquidity risk, but is not committed to maintain a minimum level of OC in the program (above the legal requirement of 2%), which introduces the risk that the credit enhancement could decrease in the future to levels that are not commensurate with the current rating. On the other hand, OP Mortgage Bank actively manages the program to limit interest rate and asset-liability maturity mismatches, which reduces market value risk. Finland Escutia, Marta
Realkredit Danmark A/S (Capital Center S Mortgage Covered Bonds)(AAA/Stable/A-1+)  
ESG credit factors influence the credit profile of Realkredit Danmark's capital center S covered bond program in a broadly similar way as most other Danish covered bond issuers that we rate. In its capital center S, Realkredit Danmark issues the covered bonds under the Danish SDROs framework with continuous LTV surveillance. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer has not committed to maintain a minimum level of OC in the program (besides the legal requirement of 8% risk-weighted assets), which introduces the risk that the bonds' credit enhancement could decrease in the future to levels that are not commensurate with the current rating. Therefore, the maximum achievable collateral-based uplift is reduced by one notch. Denmark Hofmann, Andreas
Realkredit Danmark A/S (Capital Center T Mortgage Covered Bonds)(AAA/Stable/A-1+)  
ESG credit factors influence Realkredit Danmark's capital center T covered bond program's credit profile in a broadly similar way as most other Danish covered bond issuers that we rate. In its capital center T, Realkredit Danmark issues the covered bonds under the Danish SDROs framework, with continuous LTV surveillance. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum level of OC in the program (besides the legal requirement of 8% risk-weighted assets), which introduces the risk that the bonds' credit enhancement could decrease in the future to levels that are not commensurate with the current rating. Therefore, the maximum collateral-based uplift is reduced by one notch. Denmark Hofmann, Andreas
Realkredit Danmark A/S (General Capital Center)(AAA/Stable/--)  
Realkredit Danmark's general capital center's exposure to environmental and governance factors is broadly similar to most other Danish covered bond issuers that we rate, while social factors positively affect the program rating, in our view. In its general capital center, Realkredit Danmark issues the covered bonds under the Danish ROs framework without continuous LTV surveillance. Over a quarter of the cover pool are loans backed by subsidized housing mortgages. Subsidized housing providers in Denmark are non-profit associations set up to ensure affordable housing for the general population and are partly guaranteed by the government. In our analysis, we apply a higher recovery rate on guaranteed loans, giving benefit to the presence of a guarantor, usually either the Danish state or a municipality. This leads to a comparably low credit risk assessment. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum level of OC in the program (besides the legal requirement of 8% risk-weighted assets), which could decrease the bond's credit enhancement in the future to levels not commensurate with the current rating. Therefore, the maximum achievable collateral-based uplift is reduced by one notch. Denmark Hofmann, Andreas
Santander UK PLC Global Covered Bond Program(AAA/Stable/--)  
ESG credit factors influence the credit quality of Santander UK's cover bond program in a broadly similar way as other U.K. issuers we rate. The pool features a material amount of loans granted to first-time buyers, which receive an adjustment in our credit analysis, unless their seasoning exceeds 18 months. Although the presence of these loans has a slightly negative effect on credit results, it does not affect our overall assessment. In terms of governance, as a U.K. regulated covered bond program, it is regulated and monitored by the FCA. A monthly asset coverage test is carried out to ensure that the bonds are sufficiently overcollateralized. We consider liquidity risk to be covered, mainly because most of the outstanding bonds feature soft-bullet maturities. Thanks to the combination of these two factors, the program can benefit from the full four notches of collateral-based uplift. U.K. Lanza, Matteo
Société Générale SCF (Legislation-Enabled Public Sector Covered Bond Program)(AAA/Stable/A-1+)  
ESG considerations are not material factors for Société Générale SCF's cover bonds. Governance factors consider the French SCF legislation, which addresses the main requirements under our covered bonds criteria. The French banking regulator, ACPR, licenses and supervises French SCF issuers, and the pool is audited quarterly by an external asset monitor. The commitment to maintain OC in the program is achieved through an asset coverage test. We consider liquidity risk to be covered through the provisions of the SCF legislation. These features allow achieving the full four notches of collateral-based uplift. France Rossi, Adriano
SP Mortgage Bank PLC (Mortgage Covered Bond Program)(AAA/Stable/--)  
ESG credit factors influence SP Mortgage's covered bond program's credit profile in a broadly similar way as most other Finnish covered bond issuers that we rate. Currently, the bank does not offer a specific green mortgage products. The Finnish government guarantees part of the loan on certain residential mortgages but as we do not consider the guarantee timely, it does not affect the credit analysis. SP Mortgage commits to maintain the level of OC in the program that is commensurate with the current rating. Further, the bonds' soft-bullet repayment structure mitigates liquidity risk. Finland Woelk, Judit
Sparbanken Skane AB (Mortgage Covered Bond Program)(AAA/Stable/--)  
Environmental and social credit factors influence Sparbank Skane's cover pool's credit quality in a broadly similar way to other Swedish covered bond issuers we rate. The bank has quantified targets for reducing its direct emissions and requires suppliers to abide by its code of conduct. It also publishes a third-party ESG report, and reports on progress towards the targets and follows up with suppliers regarding their adherence to the code of conduct. The issuer focuses on residential borrowers, and the current ESG focus has not affected our credit analysis of the cover pool. Certain features of the Swedish tax system and market have incentivized the origination of a relatively high proportion of interest-only loans, which we consider as credit negative in our analysis. However, the share of this type of loans declined since 2016, with the introduction of mandatory amortization requirements. Sparbank Skane is committed to maintain a minimum level of OC in the program commensurate with the rating. The program issues hard bullet covered bonds, and relies on the bank to manage liquidity risk in the cover pool. The lack of liquidity coverage reduces the unused notches to three from four notches. Sweden Andersen, Casper
Storebrand Bank ASA (Covered Bond Program)(AAA/Stable/--)  
ESG credit factors influence the credit quality of Storebrand's cover pool in a broadly similar way to other Norwegian issuers. The Storebrand group is a large investor in the green financial market and a green bond framework is in the making. Said framework will apply to all the group’s companies, including the Boligkreditt (the covered bond issuer). Currently, we do not see in the program the presence of environmental or social factors capable of bearing an influence on its overall credit quality. Given that the issuer’s geographical focus is the Oslo area, we do not consider the mortgages in the cover pool to be significantly exposed to regions with potential higher sensitivity to oil prices. All outstanding covered bonds have soft-bullet maturities, and we do not adjust the potential rating due to liquidity risk. Moreover, the issuer has committed through a public statement to maintain a level of OC commensurate with our rating. The combination of these two governance factors allows the program to achieve all four potential notches of collateral-based uplift. Norway Lanza, Matteo
Swedbank Mortgage Covered Bond Program AB(AAA/Stable/--)  
Swedbank’s cover pool comprises assets with an environmental or social connotation, such as forestry assets as well as loans to housing associations and multifamily houses. In our analysis, we consider these as commercial assets having a relatively higher credit risk compared to residential mortgages. Certain features of the Swedish tax system and market have incentivized the origination of a relatively high proportion of interest-only loans, which we consider as credit negative in our analysis. However, the share of this type of loans declined since 2016, with the introduction of mandatory amortization requirements. On the governance side, the issuer is not committed to maintain a minimum level of OC in the program, which introduces the risk that the available credit enhancement could decrease in the future to levels that are not commensurate with the current rating. Moreover, Swedbank does not cover 180 days of liquidity needs. These factors reduce the potential notches of collateral-based uplift to two from four in our analysis. Sweden Escutia, Marta
Takarek Mortgage Bank Co. PLC (Mortgage Covered Bond Program)(BBB/Stable/--)  
Our rating on Takarek Mortgage Bank’s covered bond program reflects our analysis of the jurisdictional support, as capped by Hungary's sovereign rating, and does not incorporate any collateral-based uplift. Consequently, environmental and social credit factors do not affect the credit enhancement required for the current rating. In terms of governance, we note that the issuer has committed to maintain OC of at least 4% in order to maintain the rating on the covered bonds based on the jurisdictional support analysis. The covered bond legislation does not require the issuer to hedge liquidity risk. However, the issuer has committed to maintain liquid assets to cover at least six months of liquidity needs. This however, does not affect the current covered bond rating which is based on the jurisdictional-supported rating level. Hungary Swiderek, Natalie
Totalkredit A/S (Capital Center C Mortgage Covered Bond)(AAA/Stable/--)  
Environmental and social credit factors influence the credit profile of Totalkredit's capital center C covered bond program in a broadly similar way as most other Danish covered bond issuers that we rate, while governance considerations positively affect our rating on the program. In this legacy capital center, the covered bonds are issued under the Danish RO framework, without continuous LTV surveillance, and are backed mainly by Danish residential properties and substitute assets. After Nykredit Realkredit's 2003 takeover of Totalkredit, the capital center remained separate from other Nykredit Realkredit capital centers and is now in run-off mode. We consider the Danish match-funded structures to mitigate liquidity risk and significantly lower the level of OC required to maintain the current rating on the covered bonds. The issuer is not committed to maintain a minimum OC level in the program, which could decrease the bonds' credit enhancement in the future to levels that are not commensurate with the current rating. We consider governance factors to have a neutral effect on the rating. We believe the significant lower OC commensurate with the rating due to match funding mitigates some of the risk caused by the lack of a committed OC. Denmark Woelk, Judit
UniCredit SpA (Mortgage Covered Bonds)(AA-/Stable/--)  
We view UniCredit's cover pool exposure to ESG as in line with other European issuers we rate. In terms of governance, the program falls under the Italian OBG legislation, which--although it is principle based--addresses the main requirements of our criteria. Italian OBG issuers are licensed and supervised by the Bank of Italy as domestic banking regulator, and the pool is monitored periodically by an external asset monitor. The commitment to maintain OC in the program is achieved through an asset coverage test. The bonds' soft-bullet repayment structure addresses liquidity risk. These features allow achieving the full four notches collateral-based uplift. Italy Rossi, Adriano
United Overseas Bank Ltd. (UOB) Global Covered Bond Program(AAA/Stable/--)  
We view UOB's cover bond program's exposure to ESG credit factors to be in line with its peers in Singapore. Similarly, at issuer level, ESG credit factors for UOB are broadly in line with those for its industry and Singapore peers. Covered bonds under the program are subject to requirements of the Monetary Authority of Singapore's (MAS) Notice 648, which requires the bank to have appropriate risk management and internal controls to manage the issuance of covered bonds. This includes performing the asset coverage test, conducting stress tests on covered bond issuance, having a suitably qualified external auditor appointed as a cover pool monitor to (among others) verify compliance of cover pool composition, and having adequate risk management. MAS Notice 648 also requires the bank to update valuations of the residential properties securing the mortgages in the cover pool at least annually. The issuer commits to maintain a minimum level of OC commensurate with our requirement for the current ratings. Moreover, the soft-bullet repayment structure mitigates liquidity risk. These features allow the program to achieve four notches of collateral-based uplift. Singapore Leong, Calvin
Van Lanschot Kempen Wealth Management N.V. CPT Mortgage Covered Bond Program(AAA/--/--)  
In our view, Van Lanschot's CPT amortization profile is a positive governance credit factor. This feature mitigates refinancing risk, allowing us to de-link the rating on the program from the ICR, which reduces the credit enhancement required at each rating level. While certain other features of the Dutch tax system have incentivized the origination of high LTV and interest-only loans, and interest rate on the mortgages are generally reset with no pre-established rules, introducing uncertainty around future cash inflows from the cover pool, we still consider governance to be overall supportive. Furthermore, the uncertainty around interest rate payments on the cover pool is partially mitigated by the fact that the servicer is contractually obliged to offer a minimum reset rate on the mortgages and the bonds pay fixed interest rates. Environmental and social credit factors have a neutral influence on the credit quality of Van Lanschot's cover pool. The Netherlands Escutia, Marta
Wuestenrot Bausparkasse AG (Mortgage Covered Bond Program)(AAA/Stable/--)  
Environmental factors influence the credit quality of Wuestenrot Bausparkasse's cover pool in a broadly similar way as other German mortgage covered bond programs that we rate. As a Building Savings Bank, the issuer is subject to the German Building Society Act ("Bausparkassengesetz"; "BSpG"), which restricts business opportunities for building societies when compared to universal banks. The bank's operations are limited to providing savings products to support future mortgage lending. With a savings contract, the saver acquires a legal right to a building savings loan. The cover pool mainly consists of very granular residential mortgage loans. We consider that the bank’s business focus on residential mortgage savers has a positive effect on the credit enhancement required for the current rating. Under the German Pfandbrief law, 180 days of liquidity needs must be covered by liquid assets. The issuer does not commit to a certain level of OC, which introduces the risk that the available credit enhancement could decrease below a level required to maintain the current rating on the covered bonds. We reflect this in our analysis by reducing the maximum collateral-based uplift above the jurisdiction-supported rating level by one notch. While this does not affect our rating on the covered bonds, it reduces the number of unused notches available to the program. Germany Swiderek, Natalie

This report does not constitute a rating action.

Primary Credit Analysts:Antonio Farina, Madrid (34) 91-788-7226;
antonio.farina@spglobal.com
Marta Escutia, Madrid + 34 91 788 7225;
marta.escutia@spglobal.com
Casper R Andersen, Frankfurt (49) 69-3399-9208;
casper.andersen@spglobal.com
Adriano Rossi, Milan + 390272111251;
adriano.rossi@spglobal.com
Analytical Manager:Barbara Florian, Milan (39) 02-72111-265;
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Judit O Woelk, Frankfurt (49) 69-33-999-319;
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