Scope’s update of its covered bond rating methodology further clarifies and refines its analytical approach. The core principles of the rating approach remain unchanged and the methodology as proposed has no impact on existing covered bond ratings.

The update clarifies that the methodology can be used to assign ratings to dual recourse covered bonds other than those defined in the European Covered Bond Directive. A key analytical consideration is whether payment obligations on the covered bonds would be affected by a moratorium or other applicable insolvency proceedings attached to the initial issuer or sponsor.

The updated covered bond rating methodology also includes the following adjustments:

1. Clarification on how the cover pool complexity category defines the maximum cover pool support;
    
2. Changes in the analytical approach to assess the credit risk for substitute assets;
    
3. Alignment of thresholds for assessing the credit quality of cover pool assets with those in the General Structured Finance Rating Methodology;
    
4. Introduction of an approach to performing additional sensitivity assessments for market risks stresses; and
    
5. Editorial changes.

The methodology can be downloaded here or on www.scoperatings.com.