OREANDA-NEWS. Fitch Ratings has affirmed ING Belgium's (A+/Negative) EUR1.75bn mortgage pandbrieven at 'AAA'. The Outlook is Stable.

KEY RATING DRIVERS
Fitch has updated its breakeven overcollateralisation (OC) for the 'AAA' rating to 36.0% (from 43.0% previously), following the issuance of two further series under the programme. The issuance reduced the maturity mismatches between the assets (9.8 years weighted average (WA) maturity) and the liabilities (6.1 years WA maturity). Under the stressed scenarios considered in Fitch's cash flow analysis for the programme, the WA life of the assets remains higher than that of the liabilities.

The 'AAA' breakeven OC of 36.0% is driven by the cover pool's cash flow valuation of 22.2% in a 'AAA' scenario (compared with 29.0% previously). This reflects the unhedged 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 relative tightening following the issuance of the two new pandbrief series. The cover pool's credit loss remains unchanged at 10.1% in a 'AAA' scenario. The asset disposal loss is 8.9% (compared with 9.6% previously), reflecting the continued large maturity mismatches between the assets and the liabilities in a 'AA' rating scenario. The breakeven OC considers whether timely payments are met in a 'AA' scenario and tests for recoveries given default of at least 91% in a 'AAA' scenario.

The rating is also based on 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 93.9% OC that Fitch takes into account in its analysis, which provides more protection than the 36.0% 'AAA' breakeven OC. The Stable Outlook on the pandbrieven rating despite the Negative Outlook on ING Belgium means that the pandbrieven rating will not be affected by a downgrade of ING Belgium's IDR. The Stable Outlook also reflects Fitch's view on the underlying Belgian residential loan assets.

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' rating would be vulnerable to a downgrade if any of the following occurs: (i) ING Belgium's 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 36.0%.

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.

More details on the cover pool and Fitch's analysis will be available in a full rating report, which will shortly be available at www.fitchratings.com.

See also the report 'Breaking Down Breakeven Overcollateralisation', dated 8 July 2014, for details of Fitch approach to determining the breakeven OC components.