Series CBL48 (USD 1.5 billion) has a coupon rate of 3.186% and a maturity of
An assessment of Strong’s legal and structuring framework (LSF) associated with the recorded program.
A credit rating of the cover pool of A (low).
An LSF implied probability (LSF-L) of AA (high).
A one-notch increase in LSF-L for high recovery prospects to reach the
An overcollateralization (OC) level of 5.5% (based on the percentage of assets of 94.8% at
DBRS Morningstar considered the following factors in its analysis described above:
(1) The covered bonds are senior unsecured direct deposit bonds of BNS and are excluded from
(2) In addition to a general use of SNB assets, the covered bonds are backed by a diversified portfolio of Canadian conventional residential first mortgages with a maximum loan-to-value (LTV) ratio of 80.0% at the origin (the
(3) Covered Bonds benefit from several structural features, such as a reserve fund, where applicable, and rating thresholds for swap counterparties, servicer, account bank, cash manager and supplier guaranteed deposit account.
(4) In the event of default by the SNB, the final maturity date of the covered bonds can be extended by 12 months, which increases the likelihood that the covered bonds can be fully repaid.
(5) There is a specific legislative framework for covered bonds in
Despite these strengths, covered bond ratings could face the following challenges:
(1) A weakened housing market in
(2) BNS may need to add mortgages to maintain the
(3) There is an inherent liquidity gap between the scheduled repayments of the covered bonds and the repayment of the underlying mortgage loans over time. This risk is mitigated by overcollateralisation, the constitution of a reserve fund if the SNB is not rated at least A (low) or R-1 (low) and the extension of the maturity by 12 months in the event of default of the SNB.
BNS is one of
More details on the
No environmental/social/governance factor had a significant or relevant effect on the credit analysis.
A description of how DBRS Morningstar considers ESG factors in the DBRS Morningstar Analytical Framework is available in DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/ research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
Unless otherwise stated, all figures are in Canadian dollars.
The main methodology is the rating and monitoring of covered bonds (
Related regulatory information pursuant to National Instrument 25-101 Designated Rating Organizations is incorporated by reference and may be viewed by clicking the link under Related Documents or by contacting us at [email protected]
The rated entity or its related entities participated in the rating process for this rating metric. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Please see the relevant appendix for more information on the sensitivity of the assumptions used in the rating process.
This note is validated by
The last rating action on the recorded program was on
For more information on DBRS Morningstar’s historical default rates published by the
Lead Analyst: Fanfei Gong, Vice President, Canadian Structured Finance, Global Structured Finance
Chairman of the rating committee:
Initial listing date:
For more information on this credit or this industry, visit www.dbrsmorningstar.com or contact us at [email protected]
Such. +1 416 593-5577
Main methodology: rating and monitoring of covered bonds (
Predictive model: Canadian RMBS model (
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in the USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU approved
Unsolicited participation with access
Unsolicited participation without access
Unsolicited Non Participating
03-Jun-22Covered Bonds, Series CBL48 New Rating AAA-- CA