DBRS’s A (high) rating of Intesa Sanpaolo OBGs was put under review with developing implications yesterday (Tuesday), with amendments to the programme’s swap documentation potentially outweighing any downward pressure on the rating resulting from a sovereign downgrade.

The rating agency put its A (low) rating of the Republic of Italy on review with negative implications on 5 August, citing downside risks resulting from a combination of political uncertainty surrounding a forthcoming constitutional referendum and pressure on Italian banks, amid a fragile recovery and a less stable external environment.

DBRS said yesterday that, in itself, a one-notch downgrade of the sovereign rating would not have an impact on the ratings of any obbligazioni bancarie garantite (OBGs).

Intesa Sanpaolo’s Critical Obligations Rating (COR) of A (high) – which is the Covered Bonds Attachment Point (CBAP) for its OBG programme – was put on review for downgrade on 11 August, in light of the sovereign review, and DBRS said that, other things being equal, a one-notch downgrade of the COR would result in a one-notch downgrade of the OBGs.

However, DBRS noted that amendments are being made to the programme’s swap documentation to incorporate an update to its methodology, and that these could lead to a two-notch upgrade provided sufficient overcollateralisation is in place. The amendments involve changing the basis of triggers from the issuer to the COR rating.

“As a result,” DBRS said, “both the direction and the magnitude of an assumed rating action on the OBG is uncertain.”