Fitch placed AAA mortgage Pfandbriefe issued by Deutsche Postbank on Rating Watch Negative (RWN) yesterday (Monday) because OC required for the triple-A rating has increased and the issuer may not provide an OC commitment in time. Fitch considers the programme dormant.

The rating agency considers the German bank’s mortgage-backed covered bond programme dormant because there has been no issuance off the programme for more than two years. As a result of this Fitch relies on the legal minimum overcollateralisation (OC) when assessing the programme’s rating in the absence of “valid contractual” or other public statements.

“The Rating Watch Negative reflects the risk, as indicated by Deutsche Postbank, that it might not provide an OC commitment within the next three weeks,” said the rating agency. “If Fitch relies on the legal minimum OC, the covered bonds would be downgraded to AA-.”

Higher maturity mismatches led to an increase in the rating agency’s breakeven OC for a AAA rating from 12% to 15%, with Fitch noting that maturity mismatches will increase if there is no new issuance and no new assets are added to the cover pool.