Fitch intends to meet exacting standards set by the ECB and ensure its covered bond ratings continue to be accepted for repo purposes, it said today (Tuesday), but the rating agency and others have cited challenges in meeting quarterly reporting deadlines, with the onus put on issuers.

As of 1 July 2017, rating agencies will have to meet new reporting standards if their covered bond ratings are to be accepted by the ECB for repo collateral purposes.

The ECB said on 3 November that for the purposes of the Eurosystem credit assessment framework (ECAF) external credit assessment institutions (ECAIs) must:

(a) explain newly rated covered bond programmes in a publicly available credit rating report; and

(b) make surveillance reports on covered bond programmes available on a quarterly basis.

On each point, the ECB has outlined detailed minimum requirements. These include that the periodic data be released no later than eight weeks after the end of each quarter.

The ECB set the new standards while announcing several other adjustments to its collateral eligibility rules and risk control measures.

Fitch said today that it intends to meet the new requirements, provided investor reports prepared by issuers are complete and delivered ahead of the deadline.

The rating agency believes its new issue reports, which are accessible via subscription, meet the ECB’s demands for analyses of rated programmes’ credit risk, and said its surveillance webpage for each programme is able to accommodate all mandatory items.

“Nevertheless, we estimate that few programmes are currently fully compliant: for instance, in the quarterly or monthly aggregated information provided to Fitch, the number and average size of cover assets may be missing, or maturity, interest rate and currency mismatches may not be explicitly described,” said the rating agency.

“Although this information can usually be retrieved from other files made available to Fitch from time to time, this could cause delays in publication unless it is part of a standardised template.”

Fitch said it encourages issuers to improve the content and timeliness of investor reports to ensure they retain ECB eligibility. It noted that most covered bond issuers produce quarterly investor reports four to six weeks after the quarter end, but said it would not be possible to satisfy the Eurosystem’s timetable for any issuers that publish only at the end of the deadline.

“Fitch will use reasonable efforts to display on its surveillance webpages the relevant information for each publicly rated programme at each quarter,” it said. “The agency cannot and will not be responsible for the information not being made available or not being made available in a timely fashion, nor for any consequences on the covered bonds’ eligibility to the Eurosystem’s collateral framework.”

The rating agency said it believes the guidelines will lead to more standardised and faster reporting by issuers, and will help improve transparency in the covered bond market.

Comparing current reporting practices to the new requirements, analysts said all of the four rating agencies with the biggest market share will have to make improvements. Moody’s was deemed to be the closest to meeting the new standards, with Fitch seen as having a smaller workload than Standard & Poor’s and DBRS.

Commerzbank analysts said most agencies would have to broaden the scope of data provided within their reports, giving the examples of currency mismatches, which do not feature in every rating agency’s reports, or swap counterparties – the identities of whom Fitch noted is sometimes considered confidential. The rating agency also noted that the Harmonised Transparency Template (HTT) of the European Covered Bond Council-led Covered Bond Label initiative contains most of the ECB-required fields.

The Commerzbank analysts noted that surveillance reports currently published by the rating agencies on a quarterly basis typically lack many of the data fields now requested by the ECB, and said that separate detailed programme overviews – which do tend to provide most of the information the ECB is requesting – do not necessarily follow a strict quarterly schedule.

“This applies in particular to S&P and DBRS,” they said. “Moreover, the eight week deadline could prove challenging for the agencies, judging from the looser timelines they currently apply.”