OREANDA-NEWS. Fitch Ratings has reviewed the Discontinuity-Cap (D-Cap) components and IDR uplift for three French public sector covered bonds programmes: Compagnie de Financement Foncier (CoFF), BNP Paribas Public Sector SCF (BNPP PS SCF) and Caisse Francaise de Financement Local (CAFFIL). The review does not affect the ratings of the Obligations Foncieres (OF; French legislative covered bonds) issued under each of the programmes. Fitch regularly reviews D-Caps to ensure comparability between programmes and countries.

CoFF
The IDR uplift of 2 assigned to the programme is unchanged. It reflects Fitch's view that France is a covered bond intensive jurisdiction and that Credit Foncier de France (CFF), CoFF's parent company, is not expected to be liquidated if the bank is resolved. In addition, and based on updated information, the senior unsecured debt of Groupe BPCE (on a consolidated basis) - CFF's 100% parent - represents more than 5% of its total balance sheet, adjusted for insurance assets and derivatives, providing an additional cushion for the IDR uplift.

Fitch's 'moderate' overall D-Cap assessment for the programme is unchanged and reflects the agency's view of CoFF's privileged derivatives, liquidity gap and systemic risk and cover pool-specific alternative management components, which are the weakest of the D-Cap components in Fitch's analysis of the programme.

Fitch has corrected its assessment of CoFF's asset segregation D-Cap component to 'low' from 'very low'. This continues to reflect the fact that some of the assets are not held directly by the issuer but instead constitute the collateral of a secured loan, adding a level of complexity with respect to the segregation of such assets, in line with the agency's existing analysis.

Fitch's D-Cap assessment for CoFF does not currently drive the 'AA' rating of the OF, which is based on the Long-term IDR of CFF (A/Stable), acting as reference IDR for the OF rating, and the IDR uplift of 2 assigned to the programme. The combination of the IDR and IDR uplift results in a floor for the OF rating on a probability of default (PD) basis of 'AA-', irrespective of the overcollateralisation (OC) protection available to the OF. A one-notch uplift to 'AA' can be granted when factoring in recoveries from the cover pool based on the legal minimum OC.

BNPP PS SCF
The IDR uplift of 2 assigned to the programme is unchanged and reflects Fitch's view that France is a covered bond intensive jurisdiction and that the senior unsecured debt of BNPP represents more than 5% of its total balance sheet, adjusted for insurance assets and derivatives.

Fitch has revised its overall D-Cap assessment of BNPP PS SCF to 'moderate' from 'high'. This reflects the agency's revised view of BNPP PS SCF's liquidity gap and systemic risk component, which together with the privileged derivatives component, are the weakest of the D-Cap components in Fitch's analysis of the programme.

The revision of Fitch's assessment of the liquidity gap and systemic risk D-Cap component to 'moderate' from 'high' reflects our revised stressed liquidation timing for ECA debt issued out of 'AAA' and 'AA' category countries to three to six months compared with six to nine months previously. This also follows amendments to the programme documentation and notably the implementation of a GIC account, in line with Fitch's applicable criteria, and in which the six-month pre-maturity cash reserve is currently placed.

Fitch's D-Cap assessment for BNPP PS SCF does not currently drive the 'AA' rating of the OF, which is based on the Long-term IDR of BNP Paribas (A+/Stable) and the IDR uplift of 2 assigned to the programme. The combination of the IDR and IDR uplift results in a floor for the OF rating on a probability of default (PD) basis of 'AA', irrespective of the actual overcollateralisation (OC) protection available to the OF.

CAFFIL
The IDR uplift of 1 assigned to the programme is unchanged and reflects Fitch's view that France is a covered bond intensive jurisdiction.

Fitch's 'moderate high' overall D-Cap assessment for the programme is unchanged and reflects the agency's view of CAFFIL's privileged derivatives and liquidity gap and systemic risk components, which are the weakest of the D-Cap components in Fitch's analysis of the programme.

Fitch believes that CAFFIL's notional exposure to swap counterparties - whose collateralisation and replacement provisions are not in line with Fitch's applicable criteria - remains material. In addition, the mark-to-market amount due to these counterparties could lead to a liquidity stress for the programme, as termination payments rank pari passu with the OFs. CAFFIL is heavily reliant on maintaining highly liquid assets in its cover pool to meet future liquidity needs.

Fitch's D-Cap assessment for CAFFIL does not currently drive the 'AA' rating of the OF, which is based on the Long-term IDR of CAFFIL's parent, Societe de Financement Local (SFIL; AA-/Stable) and the IDR uplift of 1 assigned to the programme. The combination of the IDR and IDR uplift results in a floor for the OF rating on a probability of default (PD) basis of 'AA', irrespective of the actual overcollateralisation (OC) protection available to the OF.