Moody’s downgraded ABN Amro Bouwfonds Nederlandse Gemeenten covered bonds by two notches and SNS Bank covered bonds by one notch today (Friday) after cutting the relevant issuer ratings as part of a wider review of Dutch financial institutions.

Bonds issued off ABN Amro Bouwfonds’s secured debt issuance programme were downgraded from Aa3 to A2 after Moody’s cut ABN Amro Bank from Aa3 to A2, on stable outlook. Moody’s noted that the covered bonds are rated in line with ABN Amro Bank’s rating because only limited cover pool information is available.

SNS Bank was downgraded by one notch from Baa1 to Baa2 and its mortgage covered bonds were cut from Aa1 to Aa2. Moody’s said that, based on a Timely Payment Indicator (TPI) of “probable”, the Baa2 rating caps the covered bond rating at Aa2.

Moody’s said that its negative rating actions on Dutch groups – whereby ING Bank was also cut by two notches, from Aa3 to A2 – reflect its view that Dutch banks will face difficult operating conditions throughout 2012 and possibly beyond.

“Furthermore, the Dutch banks affected by today’s actions have structural features which, while not new, heighten risks for creditors amidst elevated uncertainty and downside risks to the economic outlook and fragile investor confidence in Europe,” said the rating agency.. “With today’s rating actions, Moody’s is giving greater weight to these features in assessing the overall risk profile of these institutions, consistent with its previously announced analytic approach.”

The main drivers specified by Moody’s were: adverse operating conditions, including the current recession and declining house prices in the Netherlands, which it said are likely to persist, as well as pressures from the euro-zone crisis; and structural reliance on wholesale funds and large mortgage books, although Moody’s noted Dutch banks’ good access to market funding and sound asset quality to date.

Moody’s said that its assumptions about the availability of state support for ABN Amro have been revised down slightly, with support driven uplift factored into its long term rating having been reduced from four notches to three.

The rating agency noted that with an average asset weighted deposit rating between A1 and A2, Dutch banks still rank in the upper range of European banking systems.