- We have reviewed our ratings on Takarek Mortgage Bank Co. PLC's Hungarian mortgage bonds.
- In our view, the available credit enhancement is commensurate with the ratings on the outstanding covered bonds. We have therefore affirmed our 'BBB' foreign and local currency ratings on the mortgage covered bond program and covered bond issuances ("jelzáloglevelek").
- The ratings reflect our jurisdictional supported rating level (JRL) of 'bbb'. We have not assigned any notches of collateral support uplift above the JRL.
- The outlook on the ratings is stable, and reflects the stable outlook on our long-term 'BBB' rating on Hungary.
MADRID (S&P Global Ratings) June 2, 2021--S&P Global Ratings today affirmed its 'BBB' foreign and local currency credit ratings on Takarek Mortgage Bank Co. PLC's (TMB) mortgage covered bond program and all outstanding covered bond issuances. The outlook on our ratings is stable.
Our covered bond ratings process follows the methodology and assumptions outlined in our "Covered Bonds Criteria," published on Dec. 9, 2014, and "Covered Bond Ratings Framework: Methodology And Assumptions," published on June 30, 2015. Accordingly, we performed a legal and regulatory review, an operational risk review, a resolution regime analysis, a jurisdictional support analysis, a collateral support analysis, and a counterparty and sovereign risk analysis.
TMB's covered bonds are governed by the Hungarian Act No. XXX of 1997 on Mortgage Banks and Mortgage Bonds (Mortgage Bank Act). From our analysis of the legal and regulatory framework for Hungarian covered bonds, we concluded that the assets in the cover pool are isolated from the issuer's insolvency risk. The asset isolation allows us to rate the covered bond program above our assessment of TMB's creditworthiness (see "Hungarian Mortgage Covered Bond Framework Allows For Rating Covered Bonds Higher Than The Issuer," published on Aug. 24, 2018).
Under our resolution regime analysis, we determined a reference rating level (RRL) of 'bbb-'. This is based on the fact that (i) Hungary implemented the EU's Bank Recovery and Resolution Directive (BRRD), and (ii) our strong assessment of the systemic importance of mortgage bonds in Hungary (see "Assessments For Jurisdictional Support According To Our Covered Bonds Criteria," published on Nov. 27, 2020).
Our jurisdictional support analysis determined the JRL of the covered bonds as 'bbb'. We considered the likelihood for the provision of jurisdictional support of Hungarian mortgage bonds, which we assess as strong, resulting in a potential jurisdictional support uplift from the RRL of up to two notches.
However, under our covered bonds criteria, the number of notches of jurisdictional support uplift is constrained by our foreign currency sovereign rating on Hungary (BBB/Stable/A-2). Therefore, we only assign one notch of jurisdictional support uplift above the RRL.
We have not assigned any notches of collateral-based uplift above the JRL because in a rating above the sovereign scenario we cannot rely on the availability of the supplementary assets comprising mostly Hungarian sovereign exposures. The available credit enhancement exclusive of this supplementary cover pool assets is below the level that we would consider to be commensurate with the first notch of collateral-based uplift.
The cover pool comprises mainly Hungarian residential mortgage loans, and to a small extent Hungarian commercial mortgage loans and supplementary cover pool assets. We have analyzed the residential mortgage loans based on the specific adjustments defined for Hungary under our global residential loans criteria (see "Global Methodology And Assumptions: Assessing Pools Of Residential Loans," published on Jan. 25, 2019). We analyze the commercial mortgage loans under our commercial real estate criteria (see "Methodology And Assumptions: Analyzing European Commercial Real Estate Collateral In European Covered Bonds," published on March 31, 2015).
Under our covered bonds criteria, when the rating is based on the JRL assessment alone, we expect the available credit enhancement to be sufficient to cover any unhedged risks if they are not covered by the local legislation. The risks for this program are foreign exchange rate and commingling risk, and we have concluded that the available overcollateralization including mortgage and supplementary cover pool assets is sufficient to cover these risks.
The covered bonds have one unused notch for jurisdictional support. This means that all other things being equal, a deterioration of our assessment of the issuer's creditworthiness would not result in a downgrade of the covered bonds. At the same time, a rating action on Hungary would result in a corresponding rating action on the covered bonds.
Following our analysis, the application of our sovereign risk criteria also constrains our ratings on the program at 'BBB' (see "Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions," published on Jan. 30, 2019).
As a result of the above, we have affirmed our 'BBB' foreign and local currency ratings on the mortgage covered bond program and covered bond issuances.
There are currently no rating constraints to the 'BBB' ratings relating to legal, counterparty, or operational risks.
Our outlook on the ratings on the covered bonds is stable and reflects the stable outlook on our long-term rating on Hungary.
We have based our analysis on the criteria articles referenced in the "Related Criteria" section.
- Criteria | Structured Finance | General: Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities, Dec. 22, 2020
- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
- Criteria | Structured Finance | RMBS: Global Methodology And Assumptions: Assessing Pools Of Residential Loans, Jan. 25, 2019
- Criteria | Structured Finance | General: Foreign Exchange Risk In Structured Finance--Methodology And Assumptions, April 21, 2017
- Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
- Criteria | Structured Finance | Covered Bonds: Covered Bond Ratings Framework: Methodology And Assumptions, June 30, 2015
- Criteria | Structured Finance | Covered Bonds: Methodology And Assumptions: Analyzing European Commercial Real Estate Collateral In European Covered Bonds, March 31, 2015
- Criteria | Structured Finance | Covered Bonds: Methodology And Assumptions For Assessing Portfolios Of International Public Sector And Other Debt Obligations Backing Covered Bonds And Structured Finance Securities, Dec. 9, 2014
- Criteria | Structured Finance | Covered Bonds: Covered Bonds Criteria, Dec. 9, 2014
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
- MTB Magyar Takarekszovetkezeti Bank Zrt., April 30, 2021
- Global Covered Bond Insights Q1 2021, April 8, 2021
- Global Covered Bond Characteristics And Rating Summary Q1 2021, April 8, 2021
- S&P Global Ratings Definitions, Jan. 5, 2021
- Assessments For Jurisdictional Support According To Our Covered Bonds Criteria, Nov. 27, 2020
- ESG Industry Report Card: Covered Bonds, Nov. 9, 2020
- New Issue: Takarek Mortgage Bank Co. PLC (Mortgage Covered Bond Program), March 28, 2019
- Hungarian Mortgage Covered Bond Framework Allows For Rating Covered Bonds Higher Than The Issuer, Aug. 24, 2018
- Glossary Of Covered Bond Terms, April 27, 2018
|Primary Credit Analyst:||Natalie Swiderek, Madrid + 34 91 788 7223;|
|Secondary Contact:||David Benkemoun, Frankfurt + 49 69 3399 9162;|
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