Fitch has placed on negative watch six covered bond programmes across Italy, Luxembourg, the Netherlands, and the US, as it rolled out its updated covered bond rating criteria across these jurisdictions, plus Australia, Canada, Ireland and New Zealand.

After on Tuesday announcing the outcome of the application of the updated criteria to covered bonds issued out of Denmark, Germany, Norway and Spain, the rating agency has worked through programmes in the aforementioned eight jurisdictions, assigning Discontinuity Caps (D-Caps), and outlooks, the latter only if the covered bonds are not already on Rating Watch Negative (RWN).

The tally of programmes placed on RWN as a result of Fitch implementing its revised criteria stands at 10, after three German Pfandbrief and one Danish covered bond programme were placed on negative watch on Tuesday.

Under Fitch’s updated criteria, D-Caps determine the maximum rating notch uplift from an issuer’s long term default rating to the covered bond rating on a probability of default (PD) basis. The D-Cap scale stretches from 0 for “full discontinuity risk” to 8 for “minimal discontinuity” and for cases apart from a D-Cap of 8 the score is based on the highest risk assessment of any one of four components: asset segregation, liquidity gap and systemic risk, alternative management (systemic and cover pool-specific) and privileged derivatives.

Fitch placed on RWN AA- covered bonds of BA Covered Bond Issuer after applying its revised approach to wind-down programmes under its updated criteria. It said that it considers the programme to be in wind-down because no issuance has taken place since 2007. A AA- rating for the covered bonds is still possible, said Fitch, but the prevailing level of asset percentage that it relies upon does not support a two notch uplift for recoveries from the long term issuer default rating (IDR) of Bank of America NA, which is the sponsor of the programme. Fitch assigned a D-Cap of 1 for “very high risk” to the Bank of America programme.

Covered bonds issued under a Washington Mutual programme (WM Covered Bond Program), which was taken over by JP Morgan, were assigned a D-Cap of 0 for full discontinuity risk, and remain on RWN because the long term IDR of the sponsor bank, JP Morgan, is on negative watch.

Mortgage covered bonds issued by Dutch banks NIBC and SNS are on RWN because the D-Caps they were assigned – 3 and 4, respectively – cap the maximum achievable rating at a level lower than the current rating. Covered bonds issued by ABN Amro, ING, and Achmea Hypothekenbank were assigned D-Caps of 4 (moderate risk). The ratings of those Dutch programmes not on RWN have a stable outlook.

Italian covered bonds issued by Unione Banche Italiane and Banca Monte dei Paschi di Siena were placed on RWN because D-Caps of 2 (“high risk”) – as assigned to all obbligazioni bancarie garantite (OBG) programmes – limit UBI’s covered bonds’ rating to AA-, lower than the current AA+ rating, and MPS’s to A+, lower than the covered bonds’ current AA rating.

All OBG programmes not on RWN were assigned a negative outlook. In a rating action independent of the implementation of its updated rating criteria Fitch affirmed and removed from RWN covered bonds issued by Banca Popolare di Milano. Covered bonds issued by Banco Popolare remain on RWN.

Triple-A rated lettres de gage publiques issued by Hypothekenbank Frankfurt International, the former Eurohypo Europäische Hypothekenbank (Eurohypo Lux), were placed on RWN because the 2% level of overcollateralisation (OC) that Fitch takes into account in its analysis, the legal minimum in Luxembourg, is below a 16.5% breakeven OC in line with Fitch’s AAA rating.

“Under its updated criteria, Fitch considers the HFI Lux programme to be in wind-down and therefore relies on a publicly stated OC level, or if there is no such statement, on the legal minimum level of OC,” it said. “Previously, Fitch took into account the lowest OC of the last 12 months (16.5%).”

A D-Cap of 4 was assigned to HFI Lux’s programme as well as to covered bonds issued by NordLB Covered Finance Bank, with their AAA rating on stable outlook.

Covered bonds issued by three of the four Australian majors were assigned D-Caps of 2 for “high risk”, with National Australia Bank’s assigned a D-Cap of 3 for “moderate risk”, as were covered bonds issued by Suncorp-Metway Limited.

Covered bonds issued by the New Zealand subsidiaries of ANZ, Commonwealth Bank of Australia (CBA), and Westpac were assigned D-Caps of 2, with Bank of New Zealand, a subsidiary of NAB, given a D-Cap of 3. The Australian and New Zealand covered bonds rated by Fitch have a AAA rating and are on stable outlook.

Six Canadian covered bond programmes were assigned D-Caps of 3 and stable outlooks.

In Ireland Fitch assigned a D-Cap of 1 for “very high risk” to covered bonds issued by AIB Mortgage Bank and EBS Mortgage Finance and a D-Cap of 3 to Depfa ACS Bank public sector backed issuance. The Irish programmes’ ratings are on negative outlook because the issuer ratings are on negative outlook.