Italy’s Mediobanca has set up a covered bond programme, with Standard & Poor’s today (Wednesday) assigning an A rating to a first issue off the programme, a Eu1.5bn four year soft bullet bond.

The rating of the obbligazioni bancarie garantite is on CreditWatch negative, reflecting the status of Mediobanca’s issuer rating.

The programme is for up to Eu5bn, with an initial pool of Italian residential mortgages originated by CheBanca! amounting to around Eu1.7bn.

S&P has assessed the programme as having an asset liability mismatch (ALMM) risk of “high” and assigned it to Category 2 under its classification system. This results in a maximum potential rating uplift of four notches above the issuer credit rating, which is A.

With around Eu1.7bn of mortgage assets, the initial cover pool provides for overcollateralisation of 12.4%, according to S&P, which said that this is below the level commensurate with it granting a first notch of uplift above the issuer rating.