...Rating Rationale: The `AAA' rating on Bank of Nova Scotia's (BNS) structured mortgage covered bonds is based on its 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 95.0%, which is equal to Fitch's 95.0% `AAA' break-even AP. The current contractual AP supports the rating on a `AAA' probability of default basis. No IDR Uplift: Since bail-in is not an explicit provision under the current Canadian 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 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 (up to 12 months) and certain expenses on defaulted loans. Given the insurance, Fitch anticipates...
