Fitch revised the outlook on SNS Bank covered bonds from negative to stable today (Friday) because the issuer has been classified as systemically important by the Dutch central bank, which led the rating agency to increase the IDR uplift linked to the covered bonds.

Fitch affirmed SNS’s covered bonds at AA+. It noted that the De Nederlandsche Bank (DNB) classified SNS as systemically important “because of its interconnectedness within the financial system and its market share in savings and mortgages in The Netherlands. SNS Bank was classified as systemically important by the DNB in April.

The rating agency increased the issuer default rating (IDR) uplift assigned to the covered bonds from one notch to two as a result of this. SNS is rated BBB+ by Fitch.

“The IDR uplift reflects Fitch’s view on the greater motivation for alternative resolution tools to be applied to SNS other than liquidation and the level of senior unsecured debt to total adjusted assets in excess of 5% in place, providing a buffer for covered bondholders should equity and junior instruments prove insufficient to absorb losses,” said the rating agency.

The stable outlook on the covered bonds is despite a negative outlook on SNS’s rating, which captures Fitch’s expectation that a potential downgrade of the bank’s IDR to its Viability Rating of bbb- as a result of weakening state support would be offset by the two notch IDR uplift.