...Risk Variety Beyond Framework: Differentiation in Fitch's covered bonds ratings will continue to be driven by the Issuer Default Rating (IDR), the credit quality of individual cover pools, the programme's actual asset and liability mismatches and macro-economic conditions prevailing in the country. In addition, Fitch's Country Ceilings would still apply even under a harmonised regime or common guidelines in the EU. Different Assets, Different Risks: The relative illiquidity of aircraft, ship and SME loans means the timely payment of covered bonds could be jeopardised if such loans had to be sold or refinanced to meet a hard or soft bullet redemption. Nevertheless, for SME backed bonds the underlying pool could provide for a rating uplift above the IDR based on recoveries given a bonds default. Fitch's approach would be more conservative for aircraft and ship covered bonds due to material dependence on the performance of such single industries. Liquidity Crucial to Fitch's Rating Analysis:...
