Moody’s upgraded the mortgage covered bonds of Banco CEISS from A1 to Aa2 on Friday, following an improvement in the issuer’s credit quality. The upgrade mirrors a recent rating action on the covered bonds of the Spanish issuer’s parent, Unicaja Banco.

As a result of the credit quality improvement, the covered bond anchor for Banco CEISS covered bonds is now higher, said Moody’s said – which does not publicly rate Banco CEISS. The overcollateralisation (OC) in the programme is consistent with a rating of Aa2, the highest achievable under Moody’s Timely Payment Indicator (TPI) framework given the higher anchor.

Moody’s upgraded Unicaja Banco from Ba3 to Ba2 on 5 July, after the Spanish bank completed an initial public offering and raised Eu688m of capital. The rating agency subsequently upgraded Unicaja Banco’s covered bonds from A1 to Aa2 on 6 July.

Maureen Schuller, head of financials research at ING, noted that Banco CEISS has around Eu2.7bn of covered bonds outstanding, most of which are in multi-cédulas.

She added that upgrades to the Counterparty Risk (CR) assessments of cédulas issuers participating in multi-cédulas – such as Unicaja Banco or Banco CEISS – can be positive for the ratings of the notes, as under Moody’s methodology the TPI framework may restrict multi-cédulas ratings based on the weighted average covered bond anchor of the underlying issuers.

“However, even to the extent that the upgrades of Unicaja Banco and Banco CEISS were to contribute positively to the ratings of the related multi-cédulas notes, the impact on performance is likely to be limited,” she said. “For all euro benchmark multi-issuer notes outstanding, Moody’s rating is already first best.

“Therefore, a rating upgrade at Moody’s offers no immediate advantage for risk weights. Also for ECB collateral purposes, an uplift would not result in a more favourable haircut, as all bonds are rated A2 or better.”