Moody’s upgraded mortgage-backed covered bonds issued by Germany’s SEB from Aa2 to Aa1 yesterday (Wednesday) and confirmed public sector Pfandbriefe issued by the bank at Aa1 after raising the reference point for the covered bond ratings.

The rating action follows an adjustment by Moody’s of the covered bond anchor for SEB, which it has set as the issuer’s baseline credit assessment (Baa1) plus two notches. This is based on the issuer having bail-in-able debt exceeding 10% of its total liabilities.

Under Moody’s methodology, a covered bond anchor point of Baa1 plus two notches enables the covered bonds to achieve a rating of Aa1. The rating agency expects SEB to hold sufficient overcollateralisation (OC) in both programmes to support this rating and noted that the OC can be in uncommitted form because the German Pfandbrief Act recognises the enforceability of uncommitted OC in case of a covered bond anchor event.

Moody’s assigns a Timely Payment Indicator of “high” to SEB Pfandbriefe.