Moody’s put Abbey National Treasury Services covered bonds and Banco Santander Totta’s issuer rating on review for downgrade today (Tuesday) after cutting the standalone bank financial strength rating of parent Banco Santander and leaving that on review for downgrade.

Santander offices, London

The lowering of Banco Santander’s rating to Baa2, last Monday (25 June), was a consequence of a Moody’s downgrade of the Spanish sovereign, which remains on review for downgrade. Abbey’s A2 rating was put on review for downgrade on Wednesday after Santander UK’s rating was put on review.

Moody’s said that under its Timely Payment Indicator (TPI) framework and given the “probable” TPI of Abbey’s programme, the covered bonds will be downgraded if Abbey’s rating is cut by more than one notch. The rating agency will also review overcollateralisation levels and the issuer’s willingness to provide further OC, with a downgrade of the issuer increasing the expected loss on covered bonds under Moody’s analyses.

Santander Totta’s current Ba1 rating incorporates two notches of uplift from its ba3 standalone credit assessment, said Moody’s, reflecting its assessment of a high probability of parental support in case of need. The review will focus on what parental support might be available given Banco Santander’s lower rating, which could reduce the two notches of uplift.