Moody’s put mortgage covered bonds issued by Italy’s Credito Emiliano on review for downgrade yesterday (Thursday) alongside the issuer’s Baa3 rating.

Putting the Italian bank’s rating on review for downgrade, Moody’s cited: deteriorating asset quality; the bank’s capital levels – especially relatively high exposure to Italian government bonds; prospects for the bank’s profitability; and its plans to manage reliance on ECB funding that is higher than its peers’.

Moody’s said that the mortgage covered bonds’ A2 rating have “limited” TPI leeway, meaning that a downgrade of the issuer may result in a downgrade of the covered bonds. The programme has a TPI of “improbable”.

However, the rating agency noted that its review is also subject to a pending change to its methodology that is being made to take into account the incoming EU bail-in framework.