Standard & Poor’s placed on CreditWatch negative public sector covered bonds issued by Erste Europäische Pfandbrief- und Kommunalkreditbank on Friday after carrying out the same rating action on EEPK’s parent, Commerzbank, a day before.

S&P rates EEPK’s lettres de gage AA-, the level to which they were cut on 10 January and which does not represent the maximum potential uplift from the issuer credit rating (ICR). The ICR is confidential, but the rating agency said that all else being equal, any negative rating action on the issuer would directly affect the covered bonds’ rating.

The rating action on the Luxembourg issuer’s covered bonds comes after S&P on Thursday put its A rating of Commerzbank on negative review because it expects the German bank’s rebalancing of its business model to be more challenging than previously assumed.