Moody’s placed Royal Bank of Scotland covered bonds on review for downgrade on Friday, mirroring a rating action on the issuer taken to reflect uncertainty about a possible break-up of the UK bank.

RBS’s covered bonds are rated Aaa by Moody’s, and the issuer A3. The Timely Payment Indicator assigned to the bonds is “probable”, which together with the issuer rating means there is zero TPI leeway.

“Based on the current TPI of ‘probable’, if the senior unsecured long term rating A3 of RBS is downgraded by one notch, the covered bond ratings would also be downgraded,” said Moody’s.

The rating agency is reviewing RBS for downgrade because of uncertainty about the bank’s future, after the UK government announced that it is looking into the merits of a possible break-up of RBS and how this could be achieved.

“Moody’s understands that the government will consider a range of options for removing higher risk and/or impaired assets from RBS, and the ratings agency believes that some of these options may entail losses for creditors,” it said. “The heightened level of uncertainty is likely to remain at least until the publication of the government’s conclusion from its assessment, after which Moody’s expects to conclude its ratings review.”

The government has indicated that it will make an announcement about its decision in the autumn.

Moody’s affirmed RBS’s short term ratings, at Prime-2, which it said reflects its view that a downgrade of the senior ratings of more than one or two notches is unlikely, especially given that burden sharing with creditors may be deemed to be in conflict with the government’s objectives.