OREANDA-NEWS. Fitch Ratings says that there is no rating impact on the Mecenate RMBS series from the extraordinary administration of Banca Popolare dell'Etruria e del Lazio S.r.l. (BPEL). The series comprises three Italian prime RMBS transactions originated and serviced by BPEL.

In its annual performance review of the Mecenate series in January 2015, Fitch tested the effect of potential servicer disruptions and the structures' ability to cover liquidity shortfalls on the notes. The period tested was up to six months, under a rising interest rate scenario (see 'Fitch Revises Outlook on Mecenate Series' dated 16 January 2015 at www.fitchratings.com). In Fitch's view, the liquidity risk is adequately mitigated in all three transactions with funds available in the cash reserves as well as dedicated liquidity reserves (in Mecenate 2007 and 2009). In addition, the issuers have back-up servicer arrangements with Cassa di Risparmio di Volterra S.p.A. for all three transactions.

According to the transaction documentation, once the servicer enters into extraordinary administration, the issuer has the right (but not the obligation) to terminate the servicing mandate and allow the back-up servicer to step in. BPEL confirmed this is unlikely to happen as the bank's operational capabilities have not been impaired by recent events and are not expected to be impaired in the foreseeable future. Fitch notes that in previous instances of bank administration (eg Banca delle Marche), the bank retained its operational capacities and thus was not replaced in its role as servicer in transactions.

In other instances, the bank continued to manage the portfolio under the supervision of the Bank of Italy. As the bank wind-down took time, the back-up servicer had sufficient time to take over the operations from the original servicer, thus significantly reducing the exposure to operational risks (see Fitch: Italy Back-Up Servicer Appointments Slower Than Expected' dated 30 April 2015 at www.fitchratings.com). We will continue to closely monitor the progress of BPEL's administration and its effects on portfolio performance.

Mecenate 2009's pool contains loans granted to employees of the unrated originator (11.5% of the current pool). In its analysis of the transaction, Fitch assumed the default of the bank and subsequent layoffs. The analysis showed that the available credit enhancement available was sufficient to withstand such stresses.

Fitch considers the commingling risk in Mecenate 2007 and 2009 to be mitigated by available ad-hoc reserves. The analysis of Mecenate 2011, which has no commingling reserve but features substantial level of credit enhancement, showed that projected commingling losses would not have a material impact on the notes' ratings.

BPEL also acts as back-up servicer in three other Italian RMBS (CR Volterra Finance, Asti RMBS, 2011 Popolare Bari SPV) and one SME transaction (2012 Popolare Bari SME). Fitch tested payment interruption risk for these transactions and concluded that any potential liquidity shortfall following servicer disruption is mitigated by the respective cash and liquidity reserves, even in the absence of an appointed back-up servicer. However, in the medium to long term Fitch will continue to monitor BPEL's operational activities to assess its capacity and willingness to act as a replacement servicer.

Fitch understands that the extraordinary administration procedure is meant to coordinate the bank's restructuring process under the Bank of Italy's strict supervision, assuring an orderly default. As a result, the agency does not expect any immediate operational disruptions that would cause servicing discontinuity and payment interruption issues for the affected transactions.