Fitch put Banca Carige soft bullet covered bonds on Rating Watch Negative on Friday, after having on Wednesday downgraded the Italian bank and put it on RWN, warning that “the failure of the bank is a real possibility” – although Carige disputed the rating agency’s assessment.

Fitch lowered Carige’s long term issuer default rating (IDR) to CCC+ and left it on Rating Watch Negative (RWN), saying that it will be challenging for the bank to bolster its capital, which could lead to intervention by the regulator.

Carige responded by saying that during discussions with regulators, no reference has been made to a possibility of failure, and that its CET1 ratio is in line with supervisory requirements.

“It should also be considered that the ratings agency did not factor in the progress in governance and shareholders’ financial support which has been made since the shareholders’ meeting,” it said. “The bank therefore reserves the right to make assessments on Fitch’s evaluations.”

Fitch on Friday said that the downgrade to CCC+ did not affect its BBB+ rating of the soft bullet mortgage obbligazioni bancarie garantite (OBGs) because they had one unused notch from the payment continuity uplift (PCU) under its methodology.

However, the programme is now at its maximum achievable rating – nine notches above the issuer’s IDR, and the RWN on the OBGs reflects that on Carige’s IDR.