Standard & Poor’s said in a report today that covered bonds ratings actions in Europe last year were largely driven by country risk and not sovereign rating changes.

The ratings agency said that it plans to place greater emphasis on the influence country risk now has on ratings. “Our view of country risk will likely weigh on covered bond ratings,” said S&P analysts in the report.

S&P also noted that role of and support for covered bonds in the funding mix of individual banks will remain an important rating factor.

Most of the ratings activity S&P initiated between the third and the fourth quarter 2013 was triggered by sovereign or related bank rating changes.

More than one-third of the covered bonds that S&P rated in 2013 or 36%, were rated below ‘AAA’.  However analysts noted that the market in Europe has become increasingly comfortable with these lower rated covered bonds.

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