Moody’s put Baa2 mortgage covered bonds issued by Portugal’s Banco Espírito Santo (BES) on review for downgrade today (Friday), mirroring a rating action on the issuer the day before.

Moody’s rates Banco Espírito Santo (BES) Ba3 but yesterday placed the rating on review for downgrade because of shortcomings in the bank’s corporate governance, saying these “are evidenced by the unexpected announcement on 20 June 2014 of an extraordinary general meeting at BES to redefine the bank’s strategy, which will be accompanied by changes to the bank’s senior management structure”.

The covered bond anchor for BES obrigações hipotecárias is the issuer’s senior unsecured rating, i.e. Moody’s has not assigned an uplift because the bank’s debt ratio is below a 5% threshold. The Timely Payment Indicator assigned to the covered bonds is “improbable”, which means there is no TPI leeway and Moody’s could therefore downgrade the covered bonds if the covered bond anchor is cut, all else being equal.