Moody’s yesterday (Wednesday) placed on review for downgrade public sector covered bonds issued by EAA Covered Bond Bank and Depfa ACS Bank after lowering Ireland’s country ceiling, with redenomination risk driving the rating action on the Irish ACS programmes.

Public sector asset covered securities (ACS) – as such Irish covered bonds are called – issued by EAA Covered Bond Bank (EAA CBB) are rated Aaa by Moody’s and those of Depfa Aa3.

The rating agency last Thursday (6 September) lowered Ireland’s local and foreign currency bond and deposit country ceilings from Aaa to A3, and has also placed on review for downgrade EAA CBB (Aa1/P-1).

“The lower ceiling means that the highest rating that can be assigned to a domestic issuer in Ireland is now A3,” said Moody’s. “The review action on the Irish public sector covered bonds is driven by the risk of the covered bonds being redenominated. “

During the review of the Irish public sector covered bond ratings, Moody’s will focus on the degree to which the risks reflected by the A3 country ceiling, including redenomination risk, are potentially mitigated.

“Moody’s will assess if investors in the Irish public sector covered bonds are sufficiently insulated against those risks,” it said, “or if such mitigants might be introduced to the benefit of the investors.”