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Credit Hotspot: Dual Recourse Funding for SME

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Limited Rating Uplift for Renewable Energy Covered Bonds

The idiosyncratic nature of renewable energy assets and the expected high concentration in a cover pool solely consisting of them means there would be limited rating uplift for renewable energy covered bonds. We would most likely rate this type of covered bonds either at the bank's Issuer Default Rating (IDR) or one or two notches above it to reflect their exemption from bail-in in an issuer resolution scenario, if applicable.

SMEs More Suited than Infrastructure for ESN Cover Pools

Loans to small and medium-sized enterprises (SMEs) are better suited than infrastructure loans to be collateral for the proposed European secured notes (ESNs). Infrastructure portfolios tend to be concentrated, with a low number of large financings, so the addition or removal of single exposures would significantly affect the cover pool's credit quality. SME loan portfolios are more granular, facilitating the credit assessment of a revolving pool. 

Commerzbank AG's Structured SME Covered Bond Fully Repaid

Fitch Ratings will no longer provide analytical coverage for Commerzbank AG's (CBK; BBB+/Stable/F2) structured SME covered bond programme, following the maturity of the outstanding EUR500 million fixed-rate covered bond on 28 February 2018. The only covered bond issued under this programme has now been fully redeemed and no further issuance is expected to take place. The covered bond was last affirmed at 'AA' with Stable Outlook on 22 January 2018.

Covered Bonds Survey Highlights Focus on Regulation in 2018

Issuer location remains the most important factor differentiating covered bond prices, according to Fitch Ratings' latest survey of market participants. Respondents ranked the issuer's country at the top of pricing drivers, followed by the covered bond rating. 

UCITS May Allow New-Style Italy Covered Bonds IDR Uplift

Changes to the legal framework for a proposed new category of Italian covered bonds might allow Fitch Ratings to assign a resolution-related uplift over the Issuer Default Rating (IDR), if the bonds are deemed UCITS-compliant and bail-in exempt.

Fitch SME CLO Compare

Fitch Ratings has published the June edition of its SME CLO Compare, which tracks the performance of all SME CLO transactions monitored by Fitch based on their investor reports. The report is updated on a monthly basis.

Assets, Liquidity Key in Italy New Style Covered Bonds

The assessment of liquidity gaps and the creditworthiness of the underlying pools could limit the uplift above the issuer rating that is achievable for a new category of Italian covered bonds proposed under changes to the country's covered bond law. 

Proposed European Secured Note Could be Rated Under Existing Criteria

Fitch could rate the European Secured Note (ESN) instruments recently proposed by the European Covered Bonds Council (ECBC) under its existing "Covered Bonds Rating Criteria", for the on-balance-sheet ESN format, and under its "Global Structured Finance Rating Criteria." 

Fitch Affirms Commerzbank AG's SME Structured Covered Bonds at 'AA'; Outlook Stable

The rating is based on CBK's Long-term Issuer Default Rating (IDR) of 'BBB', an unchanged Discontinuity Cap (D-Cap) of 8 (minimal) and the 16.5% contractual over-collateralisation (OC). 

Detailed Credit Update Report for Commerzbank AG can be found here

Features Key to Commerz SME Covered Analysis

Programme features rather than the nature of the underlying assets were the key factor in determining how we approached Commerzbank's SME Structured Covered Bond Programme, and our decision to apply our covered bond criteria rather than structured finance criteria.



Beatrice Mezza


+44 203 530 1273


Federica Fabrizi


0039 02 8790 87232


Matthias Neugebauer


+44 203 530 1099

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