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 33% (from 36% previously), following the issuance of a new benchmark series under the programme and a EUR1.3bn pool tap (32.5% of the new cover pool). These changes notably reduced the maturity mismatches between the assets and the liabilities under the stressed scenarios Fitch considers in its cash flow analysis for the programme. However, the weighted average (WA) life of the assets remains higher than that of the liabilities.

The 'AAA' breakeven OC of 33% is driven by the cover pool's cash flow valuation of 20.1% in a 'AAA' scenario. This reflects the fixed assets and liabilities positions of the programme, as well as the gap between the stressed WA life of the assets versus the liabilities, despite its further relative tightening following the new pandbrief issuance. The cover pool's credit loss increased slightly following the pool tap, to 10.3% from 10.1% previously in a 'AAA' scenario. The asset disposal loss is 7.8%, reflecting the continued large maturity mismatches between the assets and the liabilities in an 'AA' rating scenario following the pool tap and despite the new benchmark pandbrief issuance. 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 IDR uplift of 1, an unchanged Discontinuity Cap (D-Cap) of 4 (moderate risk) and the 55.6% nominal OC that Fitch takes into account in its analysis, which provides more protection than the 33% 'AAA' breakeven OC.

The unchanged IDR uplift of 1 reflects the covered bonds' 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.

RATING SENSITIVITIES
The 'AAA' pandbrieven rating would be vulnerable to a downgrade if any of the following occurs: (i) ING Belgium's IDR is downgraded by three notches to 'BBB' or lower; (ii) the number of notches represented by the D-Cap and the IDR uplift is reduced to two or fewer; (iii) the OC that Fitch considers in its analysis decreases below our 'AAA' breakeven level of 33%.

Fitch's breakeven OC for the pandbrieven rating will be affected, amongst 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.