Moody’s downgraded 33 Spanish covered bond programmes and 53 multi-cédulas by up to four notches yesterday (Wednesday), leaving four banks’ cédulas programmes sub-investment grade. Santander UK’s rating was meanwhile placed on review for downgrade.

The four notch downgrades affecting single-issuer cédulas took in covered bond programmes of Banco Santander and Banco Bilbao Vizcaya Argentaria (BBVA), which were cut from Aa2 to A3, the highest rating possible under Moody’s methodology after the rating agency cut its country ceiling for Spain to A3.

Moody’s single-issuer cédulas ratings now range from A3 to Ba2. The lowest rated is the mortgage covered bond programme of Banco de Valencia, which was cut from Baa1 to Ba2. The programmes of Catalunya Banc, Dexia Sabadell and NCG Banco were cut to Ba1.

The downgrades were also the result of Moody’s cuts to issuer ratings. The rating agency noted that the rating actions were in addition to those announced on 13 June, which were prompted by a lowering of Spain’s rating from A3 to Baa3, on review for downgrade.

Ten covered bond programmes were cut because of the lowering of the country ceiling, said Moody’s, and 23 because of the impact of lower issuer ratings under Moody’s Timely Payment Indicator (TPI) methodology. The rating agency noted that the TPI for mortgage and public sector Spanish covered bonds has been maintained at “improbable”.

Thirty-one programmes remain on review for downgrade because their issuer ratings are in a similar position. The remainder are on review with direction uncertain to reflect either a similar status for issuer ratings or because the issuers are in the advanced stages of mergers with entities that are stronger but on review for downgrade.

The full list of affected single-issuer cédulas ratings can be found here.

Moody’s cited similar reasons for the Spanish multi-issuer covered bond (SMICB) downgrades as for the single-issuer cédulas.

“Following the downgrade of Spain’s sovereign rating to Baa3 on review for downgrade from A3, Moody’s has lowered Spain’s country ceiling to A3,” it said. “As a result, no SMICB can be rated above A3.

“In addition, the sovereign downgrade has prompted the downgrade of several Spanish banks that are issuers of covered bonds, which participate in SMICBs.”

Moody’s ratings of the multi-cédulas now range from A3 to Baa2. The worst affected issue was AyT Cédulas Cajas Global FTA Series XXV, which was cut four notches, from A1 to Baa2.

The full list of affected multi-issuer cédulas ratings can be found here.

Separately, Moody’s put Santander UK’s A2 rating on review for downgrade yesterday. The move followed Moody’s downgrade of parent Santander’s rating to Baa2.

“The downgrade of Banco Santander SA’s standalone rating to C-/baa2, one notch below the standalone credit assessment of Santander UK (C-/baa1), means that the ratings of Santander UK will no longer benefit from any uplift from parental support,” said Moody’s. “Previously, Santander UK benefited from one notch of uplift to its baa1 standalone credit assessment from parental support in addition to one notch of systemic support.

“Moody’s review of Santander UK’s A2/P-1 senior debt and bank deposit ratings will therefore focus on whether Santander UK’s role in the UK market could justify two notches of systemic support over its baa1 standalone credit assessment. A further factor in the senior debt and long term bank deposit ratings will be the future level of the UK bank’s standalone rating, which has also been placed on review for downgrade in line with the review of Banco Santander SA.”