An updated methodology released by DBRS yesterday (Monday) sheds light on the rating agency’s assessment of Canadian covered bonds and aims to make its criteria more user-friendly.

DRBS said it has expanded and clarified key criteria it uses in assessing the legal framework, consolidated and simplified terminologies and sections that were previously repetitive, and added a summary table as an appendix to its methodology.

With regard to its assessment of the legal framework, the rating agency has detailed rating thresholds and acceptable remedies for various counterparties and events within a typical Canadian covered bond programme. For example, DBRS details two rating thresholds for swap providers at which level it would require a remedy, and it explains why a remedy would be necessary and actions that could be taken.

The updated methodology maintains what the rating agency calls its “three building blocks” approach. The three building blocks include: the senior unsecured debt rating of the issuer; an assessment of the legal framework; and an evaluation of the quality and management of the cover pool and credit and cash flow analysis.

“DBRS took no rating action as a result of the updated methodology,” it said, “as the newly published rating thresholds and acceptable remedies above have already been included in the structures of all Canadian covered bond issuances rated by DBRS.”