Higher Aktia anchor lifts REMB covered bond rating to Aa2

Moody’s upgraded Aktia Real Estate Mortgage Bank covered bonds from Aa3 to Aa2 on Tuesday after designating the covered bond anchor point the senior unsecured rating plus one notch.

The rating applies to two Aktia REMB programmes, those issued under an old Finnish covered bond law and those issued under the new law.

The rating agency adjusted the issuer’s anchor point following publication of Aktia’s 2013 year-end annual accounts and further data, which led Moody’s to conclude that the bank’s level of bail-in-able debt is between 5% and 10%. Under Moody’s methodology, this is sufficient for the covered bonds to receive a one notch uplift against the bank rating.

Moody’s does not disclose Aktia REMB’s rating. The programmes is assigned a Timely Payment Indicator (TPI) of “probable-high” and Moody’s said the combination of the anchor point, Aktia REMB’s private rating and the TPI mean that the programme can be rated up to Aa2 under its TPI table.

As a result of the change in anchor point, the minimum level of overcollateralisation (OC) required to maintain the covered bond rating has fallen, and in addition, the robustness of the covered bonds rating has increased against any future issuer rating downgrade.

The minimum level of OC required by Aktia to maintain the Aa2 rating is 3%, said Moody’s. The Finnish bank currently holds OC of 124.5%, 8.5% of which is on a committed basis.

The Aktia group now issues covered bonds directly out of Aktia Bank plc (rated Aa3), whose covered bonds are rated Aaa by Moody’s. For the same reasons as for Aktia REMB’s programmes, Moody’s on Tuesday set the anchor point for Aktia Bank’s programme at its senior unsecured rating plus one notch.

“The higher CB anchor reduces the minimum collateral level which is consistent with the covered bonds’ current ratings; it also increases the robustness of the covered bond ratings against any future issuer rating downgrade,” said the rating agency.