Danske Bank A/S: Update of the S&P_Pool hedging transaction of Danske Bank AS C_Feb 2022

Transaction Update: Danske Bank A/S (Cover Pool C Mortgage Covered Bonds)

  • There is a risk that the borrowers of certain loans contained in the cover pool retain a residual right of set-off.
  • The available oversizing is provided on a voluntary basis, which reduces the amount of one notch increase based on collateral.

Outlook: stable

S&P Global Ratings’ stable outlook for Danske Bank A/S’s cover pool C mortgage covered bond ratings (“saerligt daekkede obligationer”; SDO) reflects our view that we would not automatically downgrade covered bond ratings if we were to lower our long-term ICR on Danske Bank by up to three notches.

Reasoning

This transaction update follows our periodic review of Danske Bank’s Cover Pool C Mortgage Covered Bonds. Our covered bond rating analysis follows the framework set out in our criteria article “Covered Bond Rating Framework: Methodology and Assumptions”, published on 30 June 2015.

“AAA” ratings reflect our Reference Rating Level (RRL) of “aa” and our Jurisdiction Supported Rating Level (JRL) of “aaa”, as well as our Credit Risk Overcollateralization Coverage of “AAA”.

The ratings of the program and associated issues are not limited by legal, operational, counterparty or country risks.

Description of the program

Danske Bank is one of Denmark’s leading financial services groups. It mainly operates in Denmark, Finland, Sweden and Norway.

We are currently reviewing Class C, D and I covered bonds issued under the €30,000,000,000 Global Covered Bond Program.

Cover pool C contains mortgage loans denominated in Swedish (SEK) and Norwegian (NOK) kroner, secured on Swedish and Norwegian commercial properties. Covered bonds are issued in euros and Swedish krona. The transaction includes interest rate swaps and currency swaps on assets and liabilities.

Danske Bank adheres to the principle of general equilibrium (as opposed to the principle of specific equilibrium) in order to manage exposure to market risk. The issuer has the ability to issue covered bonds that are unbundled from the mortgage assets, and the mortgage collateral acts as an overcollateralization.

The Bonds are senior secured bonds. They rank pari passu with other covered bonds and derivatives in the same cover pool. If the issuer were to go bankrupt, the pools would be separated and managed independently of each other.

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