Globally, Norway was the eighth largest issuing country in 2021 and it ranks 10th by total outstanding covered bonds. The majority of issuance is still domestic and in NOK (about 60%) with the rest mostly in EUR (35%-40% in normal years).

Covered bonds increasing as a refinancing tool
Figures in EUR bn

Source: ECBC. Scope Ratings

“Norway’s covered bond framework already met Scope’s investor-protection criteria,” said Mathias Pleissner, Scope’s deputy head of covered bonds. “Transposing the CBD into local law provided only limited changes to country’s framework, including the introduction of a cover-pool liquidity buffer requirement and a mandatory requirement to provide regular investor updates. But, importantly, aligning with the CBD ensures that Norwegian mortgage covered bonds can use the European Covered bonds (Premium) label.”

Norwegian covered bonds can achieve the maximum six notch governance support uplift allowable under Scope’s methodology. Governance support provides a floor under how much a covered bond can be rated above its issuer’s rating and constitutes an anchor for additional credit differentiation based on cover-pool support.

“Our positive view of the Norwegian legal framework generally translates into the maximum two-notch uplift, but our assessment of the country’s resolution regime for covered bonds may allow for an additional uplift of up to four notches,” Pleissner explained.

Additional cover-pool support can lift ratings up to nine notches above the issuer rating. The cover-pool support uplift is a function of the interplay between the complexity of a covered bond programme, the transparency provided to investors by the issuer, and the credit and market risk profile of the cover pool and covered bonds (obligasjoner med fortrinnsrett, or OMF).

Download Scope’s legal framework analysis for Norwegian covered bonds here.

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