OREANDA-NEWS. Fitch Ratings has affirmed ING Belgium's (A+/Stable) EUR2.75bn mortgage pandbrieven at 'AAA'. The Outlook is Stable.

KEY RATING DRIVERS

Fitch has updated its breakeven overcollateralisation (OC) for the 'AAA' rating to 38% from 33%, based on a refined modelling assumption relating to the switch to floating-rate of post-extension liabilities.

The breakeven OC is driven by the cover pool's cash flow valuation of 24.3% in a 'AAA' scenario, reflecting the large difference between the stressed weighted average (WA) life of the assets and the liabilities of 4.5 years under Fitch's analysis. This difference is not fully offset by the healthy excess spread generated under the structure and the well-matched fixed interest-rate position of the assets and pre-maturity extension liabilities.

The credit loss component remains relatively unchanged, at 10.1% in a 'AAA' scenario, while the asset disposal loss component of 9.1% continues to reflect the large maturity mismatches between the assets and the liabilities and the stressed loss from asset sales needed to meet the pandbrieven payments. The breakeven OC considers whether timely payments are met in an 'AA' scenario and tests for recoveries given default of at least 91% in a 'AAA' scenario.

The Stable Outlook on the pandbrieven rating reflects the Stable Outlook on ING Belgium and Fitch's view on the underlying Belgian residential loan assets.

The rating reflects ING Belgium's Long-Term Issuer Default Rating (IDR) of 'A+', an unchanged one-notch IDR uplift and four-notch Discontinuity Cap (D-Cap; moderate risk), as well as the 55.6% nominal OC that Fitch takes into account in its analysis, which provides more protection than the 38% 'AAA' breakeven OC.

The one-notch IDR uplift reflects the pandbrieven exemption from bail-in and that the issuer is systemically important in its domestic market, so that Fitch considers that resolution by other means than liquidation is likely.

Due to the specificities of the Belgian market with regard to the security type (such as all-sum mortgages or mortgage mandates) and the products (such as credit facilities), Fitch adjusts its original loan-to-value (OLTV) calculations for Belgian residential loans in some cases, to obtain figures compatible with its probability of default matrix. Such adjusted OLTV values are referred to as the original mortgage-to-value. This is a variation from Fitch's Criteria Addendum: Belgium - Residential Mortgage Assumptions. Given the characteristics of the underlying cover pool of ING Belgium's pandbrieven programme, this approximation does not have any material bearing on Fitch's asset model results.

RATING SENSITIVITIES

The 'AAA' pandbrieven rating is vulnerable to a downgrade if any of the following occurs: (i) ING Belgium's Long-Term Issuer Default Rating (IDR) is downgraded by four notches to 'BBB' or lower; (ii) the number of notches represented by the D-Cap and the IDR uplift is reduced to one or fewer; (iii) the OC that Fitch considers in its analysis decreases below our 'AAA' breakeven level of 38%.

Fitch's breakeven OC for the pandbrieven rating will be affected, among others, by the profile of the cover assets relative to outstanding pandbrieven, which can change over time, even in the absence of new issuance. Therefore the breakeven OC to maintain the pandbrieven rating cannot be assumed to remain stable over time.