Fitch cut Deutsche Postbank public sector Pfandbriefe from AAA to AA yesterday (Wednesday) because the issuer has not committed publicly to maintaining overcollateralisation for the programme, which the rating agency considers dormant.

The rating agency flagged the possibility of a downgrade last week, when it placed the programme on Rating Watch Negative (RWN).

“The rating actions follow the issuer’s decision not to commit publicly to maintaining overcollateralisation (OC) for this programme, which the agency deems to be dormant,” said Fitch. “As a consequence, Fitch relies in its analysis on the minimum percentage prescribed by the Pfandbrief law, which is the higher of 0% on a nominal basis and 2% on a stressed net present value basis.”

Fitch would need to rely on breakeven OC of 17% for a AAA rating of Postbank’s public sector Pfandbriefe.