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June 24 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has maintained Bank of Cyprus’ (BoC; ‘RD’) covered bonds secured by Cypriot assets on Rating Watch Negative (RWN). The covered bonds’ ‘B’ rating was originally placed on RWN on 28 March 2013 (see Fitch Downgrades BOC and CPB’s Cypriot Covered Bonds to ‘B’/RWN’ dated 28 March 2013 on www.fitchratings.com).
The covered bonds have been maintained on RWN as there have been no material changes since March with regards to the road map for the recapitalisation of BOC and the restructuring of the banking sector, which could affect the covered bonds rating. Fitch is reviewing the impact of the current recession on the performance of the residential mortgage portfolio.
By way of exception to the agency’s covered bond rating criteria, Fitch no longer uses the Long Term Issuer Default Rating (IDR) as a starting point for its covered bonds credit risk assessment. However, once BoC’s IDR is no longer on ‘RD’, the rating of the covered bonds will be affected by positive movements in BoC’s IDR.
The rating of the covered bonds would be vulnerable to a deterioration of the performance of the residential mortgage portfolio.