Moody’s cut the rating of SNS Bank covered bonds from Aa2 to A1 on Friday on the basis of a downgrade of the Dutch bank from Baa2 to Baa3 the previous day, and also reacted to nationalisation of the SNS group by saying that it would review the impact of the move on ratings.

The rating agency’s downgrade of SNS Bank on Thursday came shortly before the announcement of the nationalisation of SNS Bank and its parent SNS Reaal on Friday. Analysts saw the move as positive for covered bondholders and SNS covered bonds tightened. (See previous article here.)

Downgrading SNS Bank on Thursday, Moody’s had cited the weak and deteriorating asset quality of the bank’s property finance division, which it said were affecting its standalone credit profile. At the time Moody’s said that the bank still benefited from 10 notches of uplift over its standalone profile because of a high probability of obtaining support from the Dutch government.

Under Moody’s methodology, Thursday’s downgrade of the issuer prompted the cut in the rating of its covered bond programme by two notches, to A1 on review for downgrade. Moody’s said that any further downgrade of SNS Bank would impact the covered bond rating as a result of the combination of the Timely Payment Indicator framework and the TPI of “probable”, which remained unchanged.