Four Greek banks are amending the documentation of their covered bond programmes to remove contractual overcollateralisation commitments and reduce OC to the minimum level required by the Greek covered bond law, Fitch said yesterday (Wednesday).

The rating agency said that it is maintaining on Rating Watch Negative (RWN) covered bond programmes of Alpha Bank, EFG Eurobank, National Bank of Greece (Programme II) and Piraeus Bank after receiving OC withdrawal notifications from the four issuers. The minimum OC level required by Greek law is 5.26%, noted Fitch.

Fitch’s ratings of Greek covered bonds are capped at its country ceiling of B- and the four programmes are rated at that level, with their ratings on a probability of default (PD) basis equalised with the long term issuer default ratings of the banks (CCC).

“Based on the new reduced OC of 5.26%, a one notch uplift for recoveries can be assigned in accordance with Fitch’s methodology,” it said. “As such, the resulting covered bond ratings for Alpha, EFG, NBG Programme II and Piraeus are B- and are based on an asset percentage of 95% (equivalent to an OC of 5.26%).”

The continued RWN is the result of uncertainty surrounding the Greek political situation and an upcoming revision to Fitch’s Greek mortgage loss criteria over the next few weeks.

“While Fitch has considered the expected impact of the upcoming criteria update, the agency does not expect to resolve the RWN before it completes a full rating review of the four affected programmes,” it said.