Moody’s placed on review for downgrade the A3 ratings of three Turkish SME-backed covered bonds on Friday after having put the issuers’ respective ratings on review for downgrade.

The rating action affects the small and medium sized enterprise-backed covered bonds of Denizbank, Sekerbank, and Yapi ve Kredi Bankasi (Yapi Kredi).

The rating agency placed the deposit and debt ratings of Sekerbank (Ba1), Denizbank (Baa3), and Yapi Kredi (Baa2) on review for downgrade last Tuesday as a result of pressures on the credit strength of the institutions and the rating agency’s changing views on the level of systemic support it should reflect in senior ratings.

Moody’s said its review will involve two steps: an expected loss analysis, and a Timely Payment Indictor (TPI) framework analysis. The rating agency noted that a commitment to overcollateralisation of 25% in nominal terms would be sufficient to withstand two-notch downgrades of any of issuer’s rating without affecting their covered bonds’ A3 rating, all other things being equal.

The rating agency said that in Sekerbank’s case a TPI of “probable-high” means that if the issuer’s rating of Ba1 (on review for downgrade) is cut by three notches then the covered bond rating would also be downgraded. In Yapi Kredi’s case a TPI of “probable” means that if the issuer’s rating of Baa2 (on review for downgrade) is cut by four notches then the covered bond rating would also be downgraded. In Denizbank’s case a TPI of “probable” means that if the issuer’s rating of Baa3 (on review for downgrade) is cut by three notches then the covered bond rating would also be downgraded.