Standard & Poor’s downgraded UniCredit mortgage OBGs from AA+ to AA yesterday (Wednesday) after cutting the Italian sovereign and then the issuer. Mediobanca covered bonds were also downgraded, from BBB+ to BBB.

Under S&P’s criteria UniCredit’s mortgage covered bonds can be rated up to six notches above the sovereign because they have “low” country risk exposure, with the same maximum uplift possible above the issuer rating.

UniCredit is rated BBB, in line with the sovereign, after S&P’s recent downgrades, which constrains the rating of the issuer’s obbligazioni bancarie garantite (OBGs) at AA.

The rating agency does not grant any uplift from the issuer rating for Mediobanca’s covered bonds, whose rating is therefore constrained at BBB, triggering yesterday’s downgrade. The rating is on CreditWatch negative, mirroring the status of the issuer’s rating.