Scope publishes the final version of its covered bond rating methodology following call for comments

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Scope has published the final version of its covered bond rating methodology. The methodology update, which follows a call for comments released on 10 May 2024, has no rating impact. Scope has not received any comments.

Link to the methodology

Methodology Update

Scope's updates to the covered bond rating methodology does further expand and clarify the analytical approach for rating covered bonds and similar secured, dual recourse debt instruments. This update reflects:

1. clarification that the methodology is only applicable to dual recourse debt obligations issued by credit institutions;
   
2. clarification on the key credit factors relevant in our governance support analysis;
   
3. clarification of our standard correlation parameter and recovery rate assumptions for public sector and substitute assets;
   
4. updates and clarification to our analysis of mortgage loans: aligning the credit risk analysis with the general structured finance methodology; clarification of our recovery timing assumptions; updates to our correlation framework for concentrated, typically commercial real estate backed mortgage pools and clarification of our generic security value haircuts applicable to portfolios of concentrated mortgage loans;
   
5. updates and clarification to our cash flow risk analysis: updating our interest rate framework; updates to our foreign currency stresses; updates to our liquidity premiums for public sector and mortgage assets and our qualitative liquidity risk assessment;
   
6. clarification on the calculation of the detachment point, i.e. how we determine which part of the loss distribution needs to be covered by the cover pool;
   
7. as well as editorial changes to enhance readability and clarity.

Feedback report after call for comments

Scope has not received any analytical comments during the call-for-comments period that ended on 27 June 2024. Hence no feedback report was published.