Moody’s placed Aaa-rated Clydesdale covered bonds on review for downgrade today (Tuesday) after a cut of the UK bank in late August, noting that it will take into account any structural changes that the issuer might propose following a review that it is undertaking.

Clydesdale has two covered bond programmes, one that is registered under the UK Regulated Covered Bond framework and one that is used for retained issuance. Both programmes are affected by today’s rating action.

This comes after Moody’s downgraded Clydesdale, which is a subsidiary of National Australia Bank, from A2 to Baa2 on 23 August because it considers that the bank faces longer term structural challenges as a result of a weakened franchise and past weaknesses in risk management. It also remains exposed to short term challenges, according to Moody’s.

The rating agency has assigned Timely Payment Indicators (TPIs) of “probable” and “high” to the regulated and retained covered bonds, respectively. In combination with the new, Baa2 senior unsecured rating of Clydesdale, the TPIs could constrain the rating of the regulated covered bonds at Aa2, and that of the retained covered bonds at Aa1, according to Moody’s.

However, it said that Clydesdale is considering making structural changes to either or both of the affected programmes to enhance protections for investors.

“In the course of Moody’s review, the rating agency will consider any proposed changes to the programmes in order to assess the impact on rating and TPI,” said the rating agency.