The updated methodology, now final following a call-for-coment period, will apply to all covered bonds ratings.

Recent events regarding Credit Suisse and US regional banks have a direct read-across to covered bonds in that it was not credit quality but liquidity that led to the banks’ downfall, plus the crystallisation of market-value losses on high-quality assets.

The uncertain economic environment continues to push European house prices lower. But challenges are also crystallising in net residential mortgage lending, which nosedived to almost zero in the half year to February 2023, only slowly reverting in March.

Italy’s full transposition of the EU Covered Bond Directive paves the way for Italian issuers to return to the covered bond market. The updated legal framework is credit neutral to our governance support, allowing issuers to achieve the highest ratings.

European residential real estate firms face price, interest-cover pressure; refinancing risk intensifies for CMBS; covered bonds to shine as go-to product in troubled times; higher rates challenge open-ended real estate funds.

Changes to the methodology will not impact existing ratings if implemented as proposed. Market participants can submit comments on the proposed methodology until 29 April 2023.

The European banking sector emerged unscathed from the Covid crisis and (so far) from the war in Ukraine, but 2023 will be another year of challenges. Covered bonds will once again shine as the go-to product in stormy times.

Growth in European house prices is finally trending down. This comes as no surprise since residential activity in some countries had already indicated a slowdown and lower values. But the picture across the EU, UK, Switzerland and Norway is mixed.

Norway’s house prices are falling as the economic backdrop deteriorates and the era of ultra-low interest rates ends. This will expose households to an affordability shock. Banks are entering the challenging environment from a position of strength.

Spain’s covered bond framework has been significantly improved following legal alignment with the European Covered Bond Directive (CBD). It is now stronger and more robust, reflecting significantly enhanced legal clarity and transparency.