Standard & Poor’s yesterday (Wednesday) placed on negative review covered bonds issued off a Bank of Ireland UK covered bond programme after the issuer was placed on CreditWatch negative.

The rating agency said that it expects to affirm or lower by one notch its A- rating of Bank of Ireland’s UK covered bond programme.

The rating agency allocates the programme to Category 2 under its covered bond rating methodology and has assessed it as having “high” asset liability mismatch (ALMM) risk. This means the covered bonds can be rated a maximum of four notches above the rating of Bank of Ireland.

As the A- rating on the mortgage covered bonds already represents this maximum four notch ratings uplift above the issuer rating, a downgrade of the issuer rating by one or more notches would directly affect the ratings on the covered bonds.

“We understand from the issuer that it does not intend to manage down the ALMM risk in the near future to potentially benefit from further ratings uplift,” said S&P, “and therefore we expect that the ALMM will remain in the ‘high’ category.”

It said that all else remaining the same, a downgrade of the issuer or a downgrade of the covered bonds would not affect the target credit enhancement level that it deems commensurate to support the covered bond ratings.