Fitch has rolled out its updated rating criteria across France, Poland, and Switzerland, placing AAA rated covered bonds issued by Dexia Municipal Agency on Rating Watch Negative (RWN) because it considers dormant programmes to be more at risk than active ones.

The rating agency has assigned a Discontinuity Cap (D-Cap) of 3 (moderate high risk) to Dexia MA’s covered bonds, but said that the RWN reflects its view that dormant programmes are more at risk than active programmes, notably when considering overcollateralisation and asset pool quality maintenance.

“Under the new criteria, the agency takes into account the minimum public commitment of 5.0% OC, which translates into a current nominal OC of 11.6% and is not in line with the current rating,” said Fitch.

Covered bonds issued by CIF Euromortgage were maintained on negative watch on the same grounds, according to Fitch, as, in the absence of a public commitment, the rating agency will take into account the minimum regulatory OC of 2.0% compared with OC of 6.4% in line with the prevailing rating.

CIF Euromortgage covered bonds were also assigned a D-Cap of 3, as were covered bonds issued by Crédit Agricole Home Loan SFH and Crédit Mutuel-CIC Home Loan SFH.

Axa Bank Europe SCF, BNP Paribas Home Loan SFH, BNP Paribas Public Sector SCF, and Compagnie de Financement Foncier programmes were assigned a D-Cap of 4 (moderate risk).

A D-Cap of 2 (high risk) was assigned to Caisse de Refinancement de l’Habitat (CRH) and Société Générale SFH covered bonds.

The covered bond ratings of three French issuers were placed on negative outlook: BNP Paribas Public Sector SCF, Société Générale SFH, and CRH. A stable outlook was assigned to all other French programmes rated by Fitch.

“Although the outlook on the sovereign is negative and those on the issuers’ IDRs are stable or negative,” said Fitch, “a one notch downgrade of either the sovereign or issuer’s IDR would not be expected to lead to a downgrade of the covered bonds.

“The agency also has stable expectations for both the cover assets and OC maintenance within the respective programmes.”

Fitch also applied its new rating criteria to French pass-through programmes (CM-CIC Home Loans FCT, CMNE Home Loans FCT, VMG Vauban Mobilisations Garanties and Zephyr Home Loans FCT), assigning them a D-Cap of 8 for minimal discontinuity risk as the rating agency considers there to be no liquidity gaps and protection for interest payments in line with its criteria.

Covered bonds issued by FCT Blue Star Guaranteed Home Loans and FCT Red & Black Guaranteed Home Loans were assigned D-Caps of 4.

Fitch rates covered bonds issued by two Polish issuers, BRE Bank Hipoteczny and Pekao Bank Hipoteczny, with the former issuing mortgage and public sector backed covered bonds.

Fitch assigned stable outlooks to the programmes and D-Caps of 0 (full discontinuity), but has not assigned a score to the D-Cap components (asset segregation, liquidity gap and systemic risk, alternative management (systemic and cover pool-specific) and privileged derivatives).

“This is due to the current lack of detailed information that the agency has received to assess the individual D-Cap components,” it said.

Swiss covered bonds issued by Credit Suisse and UBS were on Friday assigned D-Caps of 3, driven by “moderate high” risk assessments of the liquidity gap and systemic risk, and systemic alternative management components of the D-Cap. The AAA rating of the covered bonds is on stable outlook.