TEXT-Fitch: SF transactions with Bank of Spain can support 'AA-sf' ratings

(The following statement was released by the rating agency)

Oct 3 - Fitch Ratings says that Spanish structured finance transactions utilising the Bank of Spain (BoS; not rated) as the issuer account bank are able to support ratings up to the existing sovereign IDR-linked cap of 'AA-sf'. Fitch will determine the ratings of affected notes taking into account the asset analysis and other counterparty exposures in accordance with applicable criteria.

In relation to the transactions listed below, Fitch has been notified that the issuer account bank role has been migrated to BoS. Fitch understands that the action was taken by transaction parties following downgrades of previous issuer account banks below threshold levels specified in transaction documentation. Fitch anticipates that additional SF transactions may choose to follow this path in view of the ratings of domestic Spanish banks.

In order to support a rating in the 'AAsf' category, Fitch's counterparty criteria expect transaction parties to commit to maintain an issuer account bank with a minimum rating of 'A-' and 'F2'. Given that BoS is not rated, the agency has undertaken separate analysis to assess the level of risk posed to the affected transactions in light of holding funds at BoS.

BoS is a national central bank within the Eurosystem. The ability of BoS to honour its euro-denominated obligations to deposit holders would be adversely impacted in the unlikely scenario of BoS exiting the Eurosystem. Such an exit would also imply Spain leaving the eurozone and Spanish local obligations being redenominated from euros to a new currency. Given this unlikely scenario, Fitch believes that the direct participation of BoS does not introduce any material incremental risk to the transactions. The agency has therefore concluded that note ratings up to the sovereign IDR cap, currently at 'AA-sf', may still be achievable.

Fitch has been provided with a copy of a letter from BoS addressed to Intermoney Titulizacion (the managing gestora for the affected transactions) that confirms the existence of the accounts held in the names of the applicable SPVs as well as the basic terms of the accounts. However, BoS has not entered into an issuer account bank agreement with the SPVs and the arrangements do not specify any obligations upon transaction parties to replace BoS as account bank in the event of credit deterioration. While detailed terms and conditions of the accounts appear to be lacking, Fitch understands that there is no time limitation upon the period for which BoS will act as account bank for the affected transactions.

Documented replacement obligations are ordinarily expected under Fitch's counterparty criteria. However, in view of the presence of the sovereign IDR-linked rating cap, Fitch does not view the lack of documented replacement actions as a material incremental risk to the transactions. Any reduction in the level of the sovereign IDR cap will have an automatic impact on the highest achievable note rating, regardless of BoS. In the event of any structural changes to the position of BoS within the Eurosystem, Fitch will review this assessment.

Following this assessment, Fitch expects to review the ratings of the following transactions, taking into account the relevant asset criteria and other counterparty arrangements, within the next four weeks.

IM FTGENCAT Sabadell 2, FTA IM Banco Popular FTPYME 1, FTA IM Grupo Banco Popular EMPRESAS 1, FTA IM Caja Laboral 1, FTA IM Cajamar 3, FTA IM Cajamar 4, FTA

Additional information is available at

. Applicable Criteria and Related Research: Counterparty Criteria for Structured Finance Transactions (New York Ratings Team)

((e-mail: pam.niimi@thomsonreuters.com; Reuters Messaging: pam.niimi.reuters.com@reuters.net; Tel:1-646-223-6330;))