Moody’s cited the superiority of Slovakia’s new covered bond law over its supplanted framework while affirming the ratings of VÚB covered bonds this week, after the issuer completed the reregistration of its existing issues under the new regime on Monday.

A new covered bond law entered into force in Slovakia on 1 January, replacing a framework that stemmed from 1990 and featured many idiosyncrasies, with a framework more aligned with European best practices.

Všeobecná úverová banka (VÚB) on Monday completed the conversion of all its outstanding covered bonds issued under the old framework, referred to as “mortgage bonds”, into covered bonds, reregistering them on the country’s new covered bond register.

Moody’s consequently affirmed the issuer’s Aa2 covered bond rating on Wednesday afternoon. It said that post-conversion the covered bonds are now governed by a stronger legal framework that better protects investors.

The rating agency said the notable strengths of the new legal framework include: a minimum overcollateralisation (OC) level of 5%; a requirement for a liquidity buffer; an option to extend covered bonds’ maturity up to 24 months following an issuer’s default (although the maturity of the converted covered bonds cannot be extended); and the appointment of an independent cover pool monitor and replacement cover pool monitor.

VÚB is the largest covered bond issuer in Slovakia, with EUR2.24bn outstanding as of the end of the first quarter.