...Rating Rationale: The `AAA' rating on National Bank of Canada's (NBC) structured mortgage covered bonds is based on NBC's Long-Term Issuer Default Rating (IDR) of `A+', the unchanged discontinuity cap (D¡Cap) of 3 (moderate-high risk), and the program's contractual asset percentage (AP) of 93.2%, which is more conservative than Fitch Ratings' 95% `AAA' break-even AP. 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 framework, in Fitch's view, the IDR remains a satisfactory indicator that the recourse against the cover pool would likely 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 (up to 12 months), and certain expenses on defaulted loans. Given the...
