Scope published its second solicited covered bond rating on Friday, adjudging Bankia’s cédulas hipotecarias AAA, and head of covered bonds Karlo Fuchs said more could follow this year, with an acquisition of Feri EuroRating Services setting Scope on the path to ECB acceptance.

Scope Ratings assigned its first solicited covered bond rating in May, giving the public sector Pfandbrief of Dexia Kommunalbank Deutschland (DKD) a AA- rating, having earlier published unsolicited ratings for several major European banks based on public information. Scope then on Friday assigned Bankia’s cédulas hipotecarias a AAA rating on stable outlook.

Scope said the rating reflects its credit view of the Spanish issuer, further enhanced by the strong credit support provided by the cover pool analysis. It noted that cashflow mismatch risk is significant but “generously buffered” by overcollateralisation (OC) of 101%.

Scope said this OC allows a maximum credit differentiation of up to nine notches above the issuer’s credit quality as assessed by Scope after applying severe credit and market value stresses to “improving but still-weak” collateral.

Scope said the programme has a six notch fundamental credit differentiation, owing to the benefits from the Spanish legal covered bond framework and Scope’s credit positive view on the resolution regime, combined with the covered bonds’ and the issuer’s systemic importance. This fundamental uplift effectively protects the covered bond rating from credit negatives on the cover pool composition and covered bond structure, it said.

“Scope views Bankia as one of the best positioned domestically oriented franchises remaining in Spain, having been significantly restructured over the past few years,” added the rating agency. “The current interest rate environment, combined with Bankia’s specificities, results in a challenging outlook for revenues and profits.

“However, asset quality in the mortgage book should continue to improve, lowering the need for provisions going forward.”

Scope added that its credit view of the issuer does not include state support. The rating agency said its stable outlook on Bankia’s cédulas hipotecarias reflects the high OC levels, Scope’s view on how likely changes in the cover pool’s risk structure would affect the rating, and its stable credit view on the Spanish issuer. Scope added that a one notch change of Bankia’s creditworthiness is unlikely to affect the covered bond rating.

Bankia’s mortgage covered bonds are also rated A by Fitch and A+ by Standard and Poor’s, according to the Spanish bank’s website.

Karlo Fuchs, head of covered bonds at Scope, noted that besides the two solicited ratings, Scope publicly rates over Eu400bn of covered bonds on an unsolicited basis, alongside further private ratings.

“This puts us on the right path,” said Fuchs. “The size of what we are covering is further increasing, and we are actively working on mandates for additional solicited ratings.

“We expect to see more solicited ratings in the course of this year.”

Scope announced on 30 June that it will acquire Feri EuroRating Services, effective 1 August. Scope said the acquisition will extend the service offerings of Scope Group by adding sovereign credit ratings, investment fund analysis and real estate research. As a result of the integration, Scope will rate 59 sovereigns and 150 real estate markets in 30 countries.

Fuchs said the acquisition will not have a direct impact on Scope’s approach to covered bonds, noting that Feri does not have a covered bond methodology nor any public covered bond ratings.

However, he said the move is an important step towards Scope’s goal of achieving ECB eligibility.

“For covered bond and also for bank ratings, issuers not only seek for a credible view on their credit but also eligibility of the rating with the ECB,” said Fuchs. “In 2015 the ECB only stated in their ECAF (Eurosystem Credit Assessment Framework) requirements that ‘you need to be significant and material’.

“Since January they have become more explicit, however. In addition to the ESMA acceptance they added quite onerous minimum coverage requirement.”

Fuchs said that the ECB had indicated that, among other requirements, rating agencies must cover at least three out of four different asset classes, and also rate the underlying sovereigns for each. Furthermore, they need to maintain a certain level of coverage for at least three years.

“We already covered four asset classes, but before the acquisition, sovereign ratings were something we did not offer,” he said. “This allows us to tick another box from the ECB.

“We still need to meet respective volume requirements, but we are comfortable that we have laid the foundations and we will eventually get there. We will continue to build up our credibility in the market, and if the ECB eventually grants us this status we will be even better positioned.”