...Discontinuity Risk Minimised: Fitch Ratings' current full discontinuity risk assessment of Polish covered bonds is likely to change based on the amended law, which awaits the signature of the Polish president and will come into force 1 January 2016. An updated discontinuity risk assessment could allow for a maximum of 10 notches uplift of the maximum achievable covered bonds rating above the rating floor, consisting of the issuer's Long-Term Issuer Default Rating (IDR) adjusted by the IDR uplift, taking into account recoveries on the bonds given default. Threefold Liquidity Protection: The current full discontinuity risk assessment limits the covered bond rating to a maximum of 2 or 3 notches above the rating floor. This assessment is driven by the absence of any liquidity provision. The amended law addresses concerns raised by Fitch through: a six month short term liquidity reserve; a 12 mandatory extension period; and a switch to pass-through if the bonds cannot be repaid at the extended...
