Standard & Poor’s may from 10 December place on CreditWatch negative several covered bond programmes because it considers that some issuers are making slower than anticipated progress on implementing measures to mitigate counterparty risk, the rating agency said yesterday (Monday).

S&P in May published updated criteria for assessing counterparty and supporting party risk in covered bonds, and at the time said that on their effective date, 12 July, it would probably place several covered bond ratings on CreditWatch negative. However, it did not place on CreditWatch covered bond programmes that were not affected by the new criteria or those where the associated issuers had submitted action plans to enable the programmes to meet the updated criteria by a transition date of 11 January 2013.

However, the rating agency yesterday said that on the basis of regular contact with issuers it is in its view becoming less likely that some of them will implement the planned remedies to fully mitigate counterparty risk by the transition date.

“This is because progress on implementing some of the action plans has been slower than anticipated,” it said. “Furthermore, given the current delays in implementing certain action plans, we are also less likely to have completed our review by the transition date if we only receive the final documentation shortly before then.”

It also noted that it might place on CreditWatch the ratings of programmes for which it needs to update its rating opinion to comply with European regulations.

“For those programmes we need to update our opinion based on the current criteria and will incorporate any progress made to implement the counterparty criteria as of the review date,” said S&P.

The rating agency on 7 November placed on negative review public sector covered bonds issued by Deutsche Pfandbriefbank because, relative to its initial view, it considers it less likely that pbb will implement its action plan to fully meet S&P’s new counterparty risk criteria by 11 January.

A covered bond analyst suggested that S&P’s latest statement was a “final warning shot” and that the end result could be that more issuers terminate their S&P rating contracts. Axa Bank Europe and Yorkshire Building Society dropped S&P from their covered bond programmes in 2011 and 2010, respectively, because of previous revisions to S&P counterparty criteria.