Fitch Ratings Removes Additional Coronavirus Stress From Australia, NZ RMBS Criteria

(The following statement was released by the rating agency) Fitch Ratings-Sydney-15 March 2021: Fitch Ratings has removed the additional coronavirus RMBS stress scenario analysis that was implemented on 28 July 2020 through the commentary Fitch Ratings Updates Australia, NZ RMBS Criteria Assumptions on Coronavirus Effects (https://www.fitchratings.com/site/pr/10130287). The additional stresses were applied to transactions in Australia and New Zealand in conjunction with the APAC Residential Mortgage Rating Criteria (https://www.fitchratings.com/site/re/10144947) to account for the expected deterioration of economic and mortgage performance following the onset of the coronavirus pandemic. Given that the Australian and New Zealand recessions were shallower than expected, the health crisis largely contained in both markets and vaccines are now being rolled out, Fitch believes the stresses contained in its APAC RMBS criteria are sufficient to account for the uncertainty related to the pandemic and it is appropriate to remove the additional stresses at this time. When the additional coronavirus RMBS stress scenario analysis was originally implemented, the expectation was that the coronavirus pandemic would cause a severe recession in Australia and New Zealand, which would be accompanied by a significant increase in unemployment and resultant mortgage defaults. However, Australia and New Zealand have navigated the health crisis far better than expected and mortgage performance has continued to be stable. There is potential upside to Fitch's current forecast for GDP growth in 2021 of 3.8% for Australia and 4.6% for New Zealand and unemployment of 6.2% for both countries. With the forecast improvement in economic conditions for 2021 and the beginning of the roll out of vaccines in both countries, Fitch has also revised down its forecast mortgage delinquency for the next 12 months, supporting the removal of the additional stress scenario analysis. Fitch will continue to monitor the future impact of the coronavirus pandemic on economic and mortgage performance. Fitch will remove the application of the additional coronavirus RMBS stress scenario analysis with immediate effect on its existing and new RMBS and covered bonds (where relevant) rating analysis. All other criteria assumptions remain unchanged. The removal of the additional stress scenario analysis may have a positive impact on notes rated below 'AAAsf'. We expect 19 notes from six RMBS transactions to be positively impacted by up to three notches. Fitch will review these transactions within the next six months. Contacts: Chris Stankovski Senior Director +612 8256 0341 Fitch Australia Pty Ltd Suite 15.01, Level 15 135 King Street Sydney 2000 Natasha Vojvodic Senior Director +612 8256 0350 Media Relations: Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. 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