...Rating Rationale: The AAA` rating on Bank of Nova Scotia`s (BNS) legislative mortgage covered bonds is based on BNS` long-term issuer default rating (IDR) of AA-`, a Discontinuity Cap (D-Cap) of 3 (Moderate-High Risk) and an asset percentage (AP) in line with Fitch Ratings` AAA` breakeven level of 93.5%. Alternative Management Drives D-Cap: The D-Cap of 3 (moderate-high risk) is driven by Fitch`s assessment of both the cover pool-specific and systemic alternative management. The cover-pool specific alternative management assessment addresses both the quality and quantity of the historical performance data provided by the issuer. The moderate-high assessment for systemic alternative management reflects the significant roles being performed post-issuer default by the trustee, acting on behalf of the guarantor, who would likely seek bondholder approval for major decisions and need to contract other parties to perform important functions. This assessment is consistent across all Canadian programs....
