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Fitch Affirms ING Bank's Covered Bonds at 'AAA'; Outlook Stable
March 23, 2017 / 5:14 PM / 8 months ago

Fitch Affirms ING Bank's Covered Bonds at 'AAA'; Outlook Stable

(The following statement was released by the rating agency) LONDON, March 23 (Fitch) Fitch Ratings has affirmed the rating of the bonds issued under ING Bank N.V.'s (A+/Stable/F1) mortgage covered bond programmes at 'AAA' with a Stable Outlook, following the programmes' annual review. These relate to ING's hard- and soft-bullet programme (ING HSB) and its soft-bullet programme (ING SB). KEY RATING DRIVERS The covered bonds' 'AAA' rating are based on ING's Long-Term Issuer Default Rating (IDR) of 'A+', an IDR uplift of two notches, a payment continuity uplift (PCU) of six notches and a recovery uplift of two notches. The combination of the IDR and IDR uplift leads to a 'AA' floor rating for the covered bonds on a probability of default basis. A recovery uplift of two notches is assigned, as the AP relied upon by Fitch in its analysis provides more protection than the covered bonds' respective stressed credit loss in a 'AAA' scenario. The two-notch IDR uplift reflects that Dutch covered bonds are exempt from bail-in, that the risk of undercollateralisation at the point of resolution is deemed by Fitch to be low and that a resolution of ING is not likely to result in the direct enforcement of the recourse against the cover pool. In addition, the bank's Long-Term IDR is driven by its Viability Rating of 'a+'. The PCU of six notches reflects the liquidity protection in place for principal payments on the covered bonds, in the form of a 12-month maturity extension for soft-bullet bonds and a 12-month pre-maturity test for hard-bullet bonds, together with at least three months' protection for interest payments in the form of a dynamic cash reserve. The recovery uplift for the covered bonds issued under each programme remains two notches, as the overcollateralisation (OC) which Fitch takes into account compensates, in each case, for credit losses modelled in a stress scenario corresponding to the level of the assigned covered bonds ratings. For ING HSB, while the foreign-currency (FC) covered bonds are fully hedged until maturity, following a default of a covered bond, recoveries from the euro-denominated assets could expose covered bond-holders of non-euro-denominated bonds to foreign-exchange risk. Such FC exposure is deemed by Fitch not to be significant. ING SB's assets and liabilities are all denominated in euros. The breakeven AP for the 'AAA' rating of the covered bonds issued under ING HSB remains unchanged at 95%, reflecting the 'AAA' credit loss for the covered bonds, which is 5% based on the latest analysis on December 2016 data. The breakeven AP for the 'AAA' rating of the covered bonds issued under ING SB remains unchanged at 93.5%, reflecting the 'AAA' credit loss for the covered bonds, which is 6.7% based on the latest analysis on December 2016 data. RATING SENSITIVITIES The 'AAA' rating of the covered bonds issued under ING Bank N.V.'s (ING) hard and soft-bullet programme (ING HSB) and its soft-bullet programme (ING SB) would be vulnerable to a downgrade if the bank's Long-Term Issuer Default Rating (IDR) is downgraded by seven or more notches to 'BB' or below. Furthermore, a downgrade of ING's IDR by one notch or more, or a reduction in the recovery uplift to one notch, would no longer enable the covered bonds to reach a 'AAA' rating on a recovery-only basis. For the covered bonds issued under ING HSB, this may occur if the percentage of outstanding foreign-currency covered bonds increases above a level where Fitch would deem the covered bonds to be significantly exposed to recoveries from assets denominated in a different currency to that of the covered bonds. Under this scenario, the 'AAA' breakeven asset percentage (AP) for the covered bonds rating would reflect a scenario where timely payment on the covered bonds is stressed in Fitch's cash-flows model. Should the new 'AAA' breakeven AP fall below the relied-upon AP, the rating could be downgraded. The Fitch breakeven AP for the covered bonds rating will be affected, among others, by the profile of the cover assets relative to outstanding covered bonds, which can change over time, even in the absence of new issuance. The breakeven AP to maintain the covered bond rating cannot therefore be assumed to remain stable. Contact: Primary Analyst Andrea Gallina Analyst +44 20 3530 1251 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst William Rossiter Director +33 1 44 29 91 47 Committee Chairperson Carmen Munoz Senior Director +34 93 323 8408 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: Additional information is available on Applicable Criteria Covered Bonds Rating Criteria (pub. 26 Oct 2016) here Criteria Addendum: Netherlands - Residential Mortgage Assumptions (pub. 11 Nov 2016) here Criteria for Rating Currency Swap Obligations of an SPV in Structured Finance Transactions and Covered Bonds (pub. 11 Aug 2016) here EMEA RMBS Rating Criteria (pub. 29 Nov 2016) here Fitch's Interest Rate Stress Assumptions for Structured Finance and Covered Bonds - Excel File (pub. 17 Feb 2017) here Fitch’s Foreign-Currency Stress Assumptions for Residual Foreign-Exchange Exposures in Covered Bonds and Structured Finance – Excel File (pub. 26 Oct 2016) here Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 20 Mar 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 20 Mar 2017) here Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 17 Feb 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020999 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. 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