...Rating Rationale: The `AAA' rating on Bank of Nova Scotia's (BNS) structured mortgage covered bonds is based on BNS's long-term issuer default rating (IDR) of `AA¡', the unchanged discontinuity cap (D¡Cap) of 3 (moderate-high risk), and the program's contractual asset percentage (AP) of 95%, which is equal to the `AAA' break-even AP supporting Fitch Ratings' rating. The current contractual AP supports the rating on a `AAA' probability of default (PD) basis. No IDR Uplift: Since bail-in is not an explicit provision under the current Canadian banking framework, in Fitch's view, the IDR remains a satisfactory indicator of the likelihood that the recourse against the cover pool would be enforced and no IDR uplift is applicable. CMHC Drives Credit Quality: All of the mortgages in the cover pool carry insurance from the `AAA' sovereign-guaranteed Canada Mortgage and Housing Corporation (CMHC), which covers principal losses, accrued interest, and certain expenses on defaulted loans. Given the...
