Moody's Update To New Issue Report, 3 March 2021

COVERED BONDS
CREDIT OPINION
3 March 2021
Valiant Bank AG - Mortgage Covered Bonds
Update to New Issue Report – Swiss covered bonds
Update Ratings
Exhibit 1
Cover Pool (CHF) Ordinary Cover Pool Assets Covered Bonds (CHF) Rating
3,688,008,789 Residential Mortgage Loans 2,068,000,000 Aaa
All data in the report is as of 30 September 2020 unless otherwise stated

Closing date Source: Moody's Investors Service
November 29, 2017
TABLE OF CONTENTS
Summary
Ratings 1 The covered bonds issued by Valiant Bank AG (Valiant or the issuer, A3(cr)) under the Valiant
Summary 1 Bank AG - Mortgage Covered Bonds programme are full recourse to the issuer and backed
Credit strengths 1 by a cover pool of assets consisting of mortgage loans secured on residential properties in
Credit challenges 2 Switzerland.
ESG considerations 3
Key characteristics 4 Credit strengths include the dual recourse structure with full recourse to the issuer and
Covered bond description 5 backing by a high-quality cover pool. Provisions in the transaction documents further reduce
Covered bond analysis 9 the credit risks.
Cover pool description 13
Cover pool analysis 19 Credit challenges include the high level of dependency on the issuer and the market value
Methodology and monitoring 23 risk of the cover pool should the issuer cease to make payments under the covered bonds.
Appendix: Income underwriting and
valuation 24 Our credit analysis takes into account the cover pool's strong credit quality, which is
Moody's related publications 26 reflected in the collateral score of 5.0% (4.0% excluding systemic risk), the current over-
collateralisation (OC) of 78.3% (on a nominal basis) as of 30 September 2020, and the
committed OC of 11.5%.
Contacts
Alexander Zeidler +44.20.7772.8713 Credit strengths
VP-Sr Credit Officer
alexander.zeidler@moodys.com » Recourse to the issuer: The covered bonds are full recourse to Valiant (A3(cr)) as the
issuer of the bonds. (See “Covered bond description”)
Nicholas Lindstrom +44.20.7772.5332
Associate Managing Director » The issuer operates in the resilient financial system of Switzerland: Switzerland's
nicholas.lindstrom@moodys.com
credit profile (Aaa, stable) reflects its very high economic resilience. Furthermore,
Switzerland's banking sector remains resilient to downside risks from high house prices
and household debt, and its capitalization is robust. (See “Covered bond description”)
MOODY'S INVESTORS SERVICE COVERED BONDS
» High credit quality of the cover pool: The covered bonds are collateralized with a dedicated cover pool of high-quality assets. The
cover pool consists of mortgage loans secured on residential properties in Switzerland. The large majority of the loans are secured
on apartments and single-family housing. We expect that up to 25% of the cover pool would constitute mortgages secured on buy-
to-let multi-family properties. The lender has for all mortgage loans recourse to the individual borrower (natural person) that owns
the property. The strong collateral quality is reflected in the collateral score, which is currently 5.0%. (See “Cover pool analysis”)
» Accessory preferential claim part of the cover pool: The covered bondholders benefit from accessory preferential claims
in addition to mortgage claims. The accessory preferential claims are pledged by the mortgagor for the benefit of Valiant and
transferred from the issuer to the guarantor by way of security. The accessory preferential claims are second and third pillar pension
fund assets and account for 1% of all cover assets. (See “Cover pool analysis”)
» Refinancing risk partly mitigated by soft-bullet bond structure: Refinancing risk is partly mitigated as the covered bonds of this
programme benefit, and all future series of covered bonds are expected to benefit, from a maturity extension of 12 months (soft
bullet covered bonds). Further, the remaining life of the cover pool assets is shorter than that of the covered bonds as the lender has
the right to demand repayment of mortgage loans in full towards the end of their rate fixing period. (See “Covered pool analysis”)
» No currency risk and limited interest rate risk: There is no currency risk in this programme since all the cover pool assets and
the cover bonds of this programme are denominated in CHF. The mismatch between the interest rate profile of the cover pool and
the covered bonds is somewhat limited since 100% of the covered bonds and 85.5% of the cover pool are fixed rate, whereby the
remaining term of the covered bonds is 7.0 years and of the cover pool is 4.3 years. (See “Covered bonds analysis.”)
» Operational risks mitigated by structural features: The transaction documents provide that
– if the issuer's short term rating is below Prime-1(cr) a liquidity reserve fund is set up to cover the sum of one month
interest due on each series of covered bonds plus senior expenses. The liquidity reserve fund will cover three months of
interest and senior expenses if the issuer's long term rating is below A3(cr);
– upon loss of Prime-2(cr), the borrowers shall be notified to make all payments directly to an account in the name of the
guarantor;
– if the CR assessment of Valiant Bank is downgraded below Baa3(cr), Valiant Bank will be required to use reasonable
endeavours to replace itself as servicer, cash manager and corporate services provider.
Credit challenges
» High level of dependency on the issuer: As with most covered bonds, before the insolvency of the issuer, the issuer can materially
change the nature of the programme. For example, the issuer can add new assets to the cover pool, issue new covered bonds with
varying promises and enter into new hedging arrangements. These changes could affect the credit quality of the cover pool as well
as the overall refinancing and market risks. Further, if the quality of the collateral deteriorates below a certain threshold, the issuer
would have the ability, but not the obligation, to increase the OC in the cover pool. (See “Covered bond analysis”)
» Market risks due to asset-liability cash-flow mismatches: Following a CB anchor event, covered bondholders, to achieve timely
principal payment, might need to rely on proceeds raised through the sale of, or borrowing against, the cover pool assets. The
market value of these assets may be subject to high volatility after a CB anchor event. In addition, covered bondholders might then
have exposure to interest rate and currency risks. (See “Covered bond analysis”)
» Exposure to property value deterioration: As with most mortgage covered bonds, a deterioration or slump in the market for
residential or other real estate could negatively affect the value of the properties securing the loans. For this programme, the
asset coverage test (ACT) together with the issuer's practice to mark-to-market property values offers protection against potential
collateral deterioration prior to issuer insolvency. (See “Covered bond description”)
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on
www.moodys.com for the most updated credit rating action information and rating history.
2 3 March 2021 Valiant Bank AG - Mortgage Covered Bonds: Update to New Issue Report – Swiss covered bonds
» Time subordination: Later-maturing covered bonds are subject to time subordination. After a CB anchor event, principal cash
collections may be used on a first-come, first-served basis, paying earlier-maturing covered bonds before later-maturing covered
bonds. This subordination could lead to the erosion of OC before any payments are made to later-paying covered bonds. To reduce
the risk of time subordination, there are certain restrictions on asset sales to repay earlier maturing covered bonds. Furthermore,
the amortisation test requires that the level of assets in the cover pool be at least equal to the level of covered bonds (See “Covered
bond analysis”)
» Risks stemming from the coronavirus outbreak: We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety. Our analysis has considered the effect on the performance of covered
bonds from the current weak Swiss economic activity and a gradual recovery for the coming months. Although an economic
recovery is underway, it is tenuous and its continuation will be closely tied to containment of the virus. As a result, the degree of
uncertainty around our forecasts is unusually high.
ESG considerations
Except with respect to the coronavirus outbreak, which we consider a social risk as described above under Economic uncertainty, in
general, we consider ESG risks to be low for covered bonds. In our assessment of the programme’s credit quality, we evaluate ESG risks
as low. The covered bonds’ dual recourse structure mitigates environmental, social and governance risks. Environmental and social
risks are further mitigated by the diversified nature of the cover pool, while governance risk is largely mitigated by (i) key programme
participants’ adherence to obligations; and (ii) the operational and substantive provisions of the programme documents. Please refer
to General Principles for Assessing Environmental, Social and Governance Risks Methodology, 14 December 2020, which explains our
general principles for assessing ESG Risks in our credit analysis globally.
» Environmental: Overall exposure to meaningful environmental risks is low in this programme as covered bondholders benefit
from the issuer’s liability to make payment on the covered bonds. There is some concentration risk in the Berne and north-west
Switzerland region. (See Cover pool analysis - Environmental considerations)
» Social: Overall exposure to meaningful social risks is moderate in this programme, mainly because social issues that affect lenders
can also affect the cover pool. Social risks are mitigated by the covered bonds’ dual recourse to both issuer and cover pool as
well as the cover pool’s diversification. In addition, we regard the coronavirus pandemic as a social risk under our ESG framework,
given the substantial implications for public health and safety. (See Summary – Credit challenges and Cover pool analysis - Social
considerations)
» Governance: Overall exposure to meaningful governance risks is low in this programme due to: (i) covered bonds’ dual recourse
to both issuer and cover pool; (ii) key programme participants’ adherence to obligations; and (iii) the operational and substantive
provisions of the programme documents. (See Additional analysis - Governance considerations)
Key characteristics
Exhibit 2
Covered bond characteristics
Moody's Programme Number: 436
Issuer: Valiant Bank AG
Covered Bond Type: Residential mortgage covered bonds
Issued under Covered Bonds Law: No
Applicable Covered Bonds Law: n/a
Entity used in Moody's TPI analysis: Valiant Bank AG

CR Assessment: A3(cr)
CB Anchor: CR Assessment + 0 notch
Senior unsecured/deposit rating: n/a
Total Covered Bonds Outstanding: CHF 2,068,000,000

Main Currency of Covered Bonds: CHF (100%)
Extended Refinance Period: Yes
Principal Payment Type: Soft bullet
Interest Rate Type: Fixed rate covered bonds (100.0%)
Committed Over-Collateralisation: 11.5% (on a nominal basis)
Current Over-Collateralisation: 78.3% (on a nominal basis)
Intra-group Swap Provider: n/a

Monitoring of Cover Pool: BDO AG
Trustees: Von Graffenried AG Recht
Timely Payment Indicator: Probable
TPI Leeway: 0 notch
Source: Moody's Investors Service, issuer data
Exhibit 3
Cover pool characteristics
Size of Cover Pool: CHF 3,688,008,789
Main Collateral Type in Cover Pool: Residential assets (100%)
Main Asset Location of Ordinary Cover Assets: Switzerland
Main Currency: CHF (100%)
Loans Count: 7,128 Residential assets, 225 Residential Multi-Family assets
Number of Borrowers: 6,915 Residential assets, 218 Residential Multi-Family assets
WA Unindexed LTV: 64.9% Residential assets, 67.3% Residential Multi-Family assets
WA Indexed LTV: 62.1% Residential assets, 65.0% Residential Multi-Family assets
WA Seasoning (months): 66 Residential assets, 75 Residential Multi-Family assets
WA Remaining Term (months): 53 Residential assets, 50 Residential Multi-Family assets
Interest Rate Type: Fixed rate assets (85.5%), floating rate assets (14.5%)
Collateral Score: 5.0% (4.0% excluding systemic risk)
Cover Pool Losses: 13.6%
Further Cover Pool Details: See Appendix 1
Pool Cut-off Date: 30 September 2020
Sources: Moody's Investors Service, issuer data
Exhibit 4
Transaction counterparties
Counterparty Type Transaction Counterparty
Sponsor n/a
Servicer Valiant Bank AG
Back-up Servicer n/a
Back-up Servicer Facilitator n/a
Cash Manager Valiant Bank AG
Back-up Cash Manager n/a
Account Bank Valiant Bank AG
Standby Account Bank n/a
Account Bank Guarantor Valiant Bank AG
Covered bond description

The covered bonds issued by Valiant Bank AG are direct, unsubordinated and unconditional obligations of the Issuer benefiting of a
guarantee given by Valiant Hypotheken AG.
Before an issuer event of default, the issuer shall make all payments of interest and principal on the covered bonds. The issuer has
mandated Valiant Hypotheken AG (a Swiss-based special purpose company) to guarantee its payment obligations in favour of the
trustee (Von Graffenried AG Recht) acting for the benefit of the covered bondholders. The guarantee comes into operation following an
issuer event of default, subject to certain conditions.
Structural diagram
Exhibit 5
Structure diagram
Source: issuer
Exhibit 7
Value of guarantee secured by a segregated cover pool that is over-collateralised
Source: issuer
Structure description
The bonds
All outstanding covered bonds benefit, and all future series of covered bonds are expected to benefit, from a maturity extension of 12
months. The bonds' maturity is extended after an issuer event of default and the activation of the guarantee, when funds by the issuer
and by the guarantor are insufficient to repay the covered bonds in full.
Ownership and control over guarantor
The guarantor, Valiant Hypotheken AG, is a Swiss-based special purpose company. The guarantor’s shareholders are the issuer (holds
98% of capital shares) and two independent shareholders (1% each). The board of directors (Verwaltungsrat) consists of up to four
members, two of which are independent. Any decision made by the board requires a majority vote by at least one of the independent
directors.
The issuer has stepped into a shareholder agreement (Aktionärsbindungsvertrag) with the independent directors, aiming to (i)
ensure the guarantor fulfills its obligation it has entered into under the transaction documentation and can act in the interest of the
covered bond holders, (ii) protect the independence of each director even after the insolvency of any shareholder, (iii) defines the
decisionmaking process between the shareholders, and (iv) grants a preferential right to buy shares from any of the shareholders.
Issuer and guarantor events of default and bond acceleration
Issuer event of default (Emittenten-Verzugsereignis) and acceleration
An issuer event of default triggers administrative steps that activate the guarantee provided by Valiant Hypotheken AG as holder of the
cover pool assets. The documentation stipulates four issuer events of default including (i) non-payment after some grace periods, (ii)
insolvency of the issuer, (iii) violation of material obligations under the programme documentation, and (iv) an unmitigated violation
of the asset coverage test or interest coverage test. Separately, if FINMA as Swiss bank regulator and resolution authority orders the
opening of insolvency procedures, then we expect that the covered bonds accelerate vis a vis the issuer, allowing the realisation of the
senior unsecured claim against the issuer's insolvency estate. An issuer event of default does not lead to an acceleration of the covered
bonds vis a vis the guarantor holding the cover pool.
Guarantor event of default (Garanten-Verzugsereignis) and acceleration
A guarantor event of default triggers administrative steps that lead to the acceleration of the covered bonds and all interest
payments cede. A guarantor event of default constitutes, amongst others, one of the following events: (i) the guarantor fails to
make principal payments under the covered bonds within 7 days and interest payments within 14 days after due date, (ii) default,
insolvency, moratorium in payments, or the resolution of the guarantor (Beschluss über die Auflösung der Garantin), (iii) breach of the
amortisation test, or (iv) breach of a material obligation of the guarantor laid down in the transaction documents.
Issuer recourse
The covered bonds are full recourse to the issuer. Therefore, the issuer is obliged to repay principal and pay interest on the covered
bonds.
Recourse to the cover pool
Following an issuer event of default, Valiant Hypotheken AG's guarantee comes into operation and the guarantor is required to pay
interest and principal on the covered bonds in accordance with the maturity dates set at bond issuance, using the proceeds from the
cover pool. The issuer has mandated the guarantor to guarantee its payment obligations in favour of the trustee acting for the benefit
of the covered bondholders.
The issuer will indemnify the guarantor for all amounts that the guarantor has to pay on the covered bonds under the guarantee. The
issuer has agreed that it will pre-fund all guarantee expenses and certain other payments, by making the corresponding payments to
the guarantor in advance of the guarantor making the scheduled payment to the covered bondholders.
To secure its indemnity obligations to the guarantor, Valiant will assign eligible mortgage claims denominated in Swiss francs to the
guarantor by way of security (Sicherungszession) and transfer the title to the related mortgage certificates to the guarantor by way of
security. For regulatory and tax reasons, the covered bondholders will not benefit from direct security over the cover pool assets or any
other assets of the guarantor. The residential mortgage claims in the cover pool rather secure obligations of the issuer in relation to the
guarantee, but not the guarantee itself. The obligations of the guarantor will be limited recourse to its available assets.
As consideration for the issuance of the guarantee, the issuer shall pay to the guarantor a fee on an ongoing basis (Garantiegebühr). A
part of this fee is used to cover certain costs of the guarantor, with the remainder (Collateral Differential) being passed back to Valiant.
On a continuous basis the issuer has to pre-fund (Finanzierungs-Verpflichtung) the amounts required by the guarantor to fulfill its own
obligations towards e.g. the covered bondholders. The guarantor has to serve various notices on the issuer to detail the amounts it
requires under various contracts it has entered into. If the issuer fails its obligation to pre-fund expenses and certain other payments
of the guarantor, the guarantor will gain access to the cover pool in order to make the respective payments. Even after an issuer event
of default (Emittenten-Verzugsereignis) the structure of the guarantor notifying the issuer with regard to funds required is upheld (until
a final bankruptcy dividend has been communicated to the guarantor). Following the activation of the guarantee and the service of a
notice to pay (Zahlungsaufforderung), the guarantor will serve a notice (Finanzierungsanzeige), obliging the issuer to make payments for
interest, principal or other upcoming guarantee expenses within 10 bank business days after notice or not later than 5 bank business
days before payments become due. If the issuer fails to pay the amount requested, then the guarantor may utilise or liquidate a
corresponding part of the cover pool assets.
Legal framework
The covered bonds are governed by the Swiss Obligation Law (Schweizer Obligationenrecht), and by the Federal Act on Financial
Services (Bundesgesetz über die Finanzdienstleistungen) as amended.
Transfer of the mortgage loans by way of security
As it is the case in other Swiss covered bond transactions, the issuer will assign eligible mortgage claims denominated in Swiss francs to
the guarantor by way of security and transfer the title to the related mortgage certificates to the guarantor by way of security.
Other structural features
Maturity extension of 12 months
The covered bonds feature a maturity extension of 12 months in case the issuer and the guarantor fail to redeem the covered bonds on
their maturity date.
Payment redirection
Upon loss of P-2(cr), the borrowers of the underlying mortgage loans will be notified about the assignment of the loans and will be
required to pay onto a cover pool bank account in the name of the guarantor.
Liquidity reserve fund
Upon loss of P-1(cr) the issuer is required to build up a liquidity reserve held in cash or authorised investments (Autorisierte
Investments)1 to cover one month of interest payments under the covered bonds and operating expenses of the guarantor. After loss of
A3(cr) Valiant is required to extend the funds of the liquidity reserve to cover three months of interest expenses under the outstanding
bonds and operating expenses of the guarantor.
According to the transaction documentation, the liquidity reserve will be funded through either (i) a deferral of the guarantor's
obligation to pay the collateral differential2, (ii) payments by the issuer or (iii) payments under the cover assets given borrowers are
required to pay directly onto the cover pool bank account of the guarantor after a borrower notification event.
Accessory preferential claim
The covered bondholders benefit from accessory preferential claims in addition to mortgage claims. The accessory preferential claims
are pledged by the mortgagor for the benefit of Valiant Bank and transferred from Valiant Bank to the guarantor by way of security.
The accessory preferential claims are second and third pillar pension fund assets and account for 1% of all cover assets. The share of
accessory preferential claims is expected to increase over time.
Over-collateralisation and cover tests
As of September 2020, the level of overcollateralisation (OC) in the programme was 78.3% on a nominal basis, of which we consider
11.5% as being available in 'committed' form. Our analysis currently relies on OC that is in committed form. 11.5% OC is consistent
with the current Aaa covered bond rating. For up to date information, please refer to the regularly updated Performance Overview
reports and rating action announcements.
Although the issuer has the ability to increase the OC in the cover pool, for example if the collateral quality deteriorates below a
certain threshold, the issuer does not have any obligation to do so other than as required by the asset coverage test (ACT). The failure
to increase OC following a deterioration of the collateral could lead to a negative rating action.
There are three key portfolio tests in the transaction: the asset coverage test (the ACT), interest coverage test (ICT), and the
amortisation test.
The asset coverage test (ACT)
The ACT uses a number of parameters to determine whether the available cover pool assets are at least equal to the amount of
outstanding covered bonds plus OC. The ACT tracks the OC consistent with the current covered bond rating but specifies a maximum
OC of 50% for ACT purposes and makes clear that the issuer is not obliged to maintain a Aaa rating. In case the covered bonds are no
longer rated Aaa, then the ACT will refer to the last published OC consistent with a Aaa covered bond rating.
The parameters of the ACT include a LTV limit, which is set at 80% of the property value securing the mortgage loan. Covered bonds
therefore may only be issued against a maximum of 80% of the property value.
The ACT references the market value of the properties securing the mortgage loans, not considering second and third pillar pension
fund assets (gross LTV; see 'accessory preferential claims').
The property market value is typically based on appraisals obtained from the IAZI comparative valuation model. At loan origination,
the lower of the effective purchase price (or investment costs) and the comparative value is used as property market value. There
is no property price indexing for ACT purposes. In the first ten years since loan origination, the property appraisal is not updated
unless (a) as part of a periodic resubmission or (b) when a creditworthiness-related event occurs or (c) in the event of risk-relevant
credit applications or mutations. If the property appraisal is more than 10 years old, the property value has to be re-estimated at
aforementioned events. In case of a so-called object-related event at the property, the property value must always be reviewed. There
is no specific stress or haircut applied to the property value for ACT purposes.
The ACT covers mortgage loan arrears. For ACT purposes, loans in arrears for over 90 days are only counted as asset value for up to
40% of the property value.
The test will be performed on each last bank business day in a month. In case of any breach of the ACT, the following consequences are
stipulated:
» An issuer event of default may be called upon if such breach is not cured or revoked until the third subsequent test date after a
relevant notice has been issued;
» With immediate effect, no further principal may be passed to the issuer or any of its affiliates and no further covered bonds may be
issued.
The interest coverage test (ICT)
The ICT determines whether the annualised interest income is at least equal to the interest expense under the covered bonds. The test
features a one-period concept aiming to anticipate the annualized interest income generated by the cover pool compared with the
annualized coupon to be paid under the covered bonds. Potential shortfalls in interest income are not considered in this comparison.
Likewise to the ACT, the ICT will be performed on each last bank business day in a month and is considered passed if the annualized
interest generated by the cover pool assets is equal or greater than the interest to be paid under the outstanding covered bonds. If the
ICT test is breached and not cured, this would constitute an issuer event of default.
The amortisation test
Following an issuer event of default, the amortisation test is designed to ensure that the level of assets in the cover pool is at least
as high as the level of covered bonds. On a monthly basis, this test compares the amount of cover pool assets with the outstanding
amount of the covered bonds. This test does not include a reference to LTV limits but counts loans in arrears for over 90 days only with
50% of their notional amount.
A breach of the amortisation test will constitute a guarantor event of default and all covered bonds would become due and payable.
Covered bond analysis

Our credit analysis of the covered bonds primarily focuses on the issuer's credit quality, refinancing risk, interest rate risk and currency
risk, as well as the probability that payments on the covered bonds would be made in a timely fashion following a CB anchor event,
which we measure using the Timely Payment Indicator. (See “Timely Payment Indicator”)
Primary analysis
Switzerland and its banking system
Banks in Switzerland (Aaa stable) benefit from operating in an open, well diversified, competitive and highly stable environment
characterised by a very high degree of economic, institutional and government financial strength, and very low susceptibility to event
risk. Strong financial regulation and the country's long-standing sociopolitical stability provide further support.
We have lowered the macro profile of Switzerland to “Strong +” from “Very Strong -” in January 2020 because of further rising
indebtedness of corporates and households to levels among the highest of any economy globally, while continuing to acknowledge
some risk-mitigating effects from high wealth. The stronger economic imbalances could increase the potential downside for Swiss
banks' asset quality in an adverse scenario.
(See “Moody's related publications: Switzerland Macro Profile: Strong+”)

Issuer analysis - Credit quality of the issuer
The issuer's CR Assessment is A3(cr). The issuer is a Swiss-based and only within Switzerland operating universal bank, focussing on the
retail sector and small to medium sized enterprise.
(For a description of the issuer's rating drivers, see the Credit Opinion, published November 2020)
The reference point for the issuer’s credit strength in our analysis is the CB anchor. The CB anchor refers to the probability that the
issuer ceases to service its payment obligations under the covered bonds. For further details on this, see our Approach to Rating
Covered Bonds.
Issuer analysis - Dependency on the issuer's credit quality
The credit quality of the covered bonds depends primarily on the credit quality of the issuer. If the issuer’s credit strength were to
deteriorate, there would be a greater risk that a CB anchor event would occur, leading to refinancing risk for the covered bonds.
Consequently, the credit quality of the covered bonds would deteriorate unless other credit risks were to decrease.
In the event that the CB anchor deteriorates, the issuer would have the ability, but not the obligation, to increase the OC in the cover
pool. Failure to increase the level of OC under these circumstances could lead to a negative rating action.
Reasons for the high level of dependency of the covered bonds with the issuer also include exposure to decisions made by the issuer in
its discretion as manager of the covered bond programme. For example, before a CB anchor event, the issuer may add new assets to
the cover pool and remove assets from the cover pool, issue further bonds and enter new hedging arrangements. Such actions could
reduce the value of the cover pool.
Refinancing risk
Following a CB anchor event, the “natural” amortisation of the cover pool assets alone cannot be relied on to repay the principal. We
assume that funds must be raised against the cover pool, for example by selling mortgage assets at a discount, if covered bondholders
are to receive timely principal payment. Where the portion of the cover pool that is potentially exposed to refinancing risk is not
contractually limited, our expected loss analysis typically assumes that this amount is in excess of 50% of the cover pool.
After a CB anchor event, the market value of these assets may be subject to volatility. Examples of the stressed refinancing margins we
use for different types of prime-quality assets are published in our Rating Methodology. (See “Moody's related publications - Moody’s
Approach to Rating Covered Bonds”)
The refinancing-positive aspects of this covered bond programme include:
» Soft bullet structure: The covered bonds issued under this programme benefits from a 12-month maturity extension
(Aufgeschobener Zahlungstag);
» Unlike other EMEA covered bond programmes, the weighted average remaining life of the assets is with 4.9 years for fixed rate
assets shorter than the remaining life of the fixed rate covered bonds (7.0 years). In Switzerland, fixed rate mortgages can be
repriced at the end of their interest rate fixing period. Alternatively, the lender can serve a termination notice towards the end of the
fixing period and then the borrower is obliged to repay the loan. The administrator of the cover pool may use the proceeds from the
termination of these loans to make payments under the covered bonds.
» Ability to reprice a small portion of the cover pool: As of the pool cut-off date, 14.5% of the cover pool assets feature a variable
interest rate or loans with a remaining term below 12 months. The lender can terminate and require repayment in full with a notice
period of 90 days for variable mortgages and up to 6 months for Saron-based mortgages. Libor-based mortgages will be superseded
until the end of 2021. The administrator of the cover pool may use proceeds from termination of these loans to make payments
under the covered bonds.
» Mortgages are seen by banks operating in Switzerland as anchor product to generate profits by selling other banking products. This
could incentivize such banks to take over the cover pool.
The refinancing-negative aspects of this covered bond programme include:
» Asset-liability mismatch: The repayment profiles of the covered bonds (bullet format) differ from the repayment profile of the
cover pool and we expect this mismatch to worsen as the issuer's credit strength deteriorates towards the CB anchor event. As a
mitigating factor, based on today's repayment profile, the Maximum Mismatch is with 0% significantly better than the average of
EMEA covered bond programmes;
» 85.5% of the cover assets are fixed rate, which means it is not possible for the lender to reprice the assets in a meaningful way;
» As of the pool cut-off date, 42.6% of the loans in the cover pool are interest-only loans or loans with indirect amortisation
(Tilgungsersatzträger) and hence will not generate liquidity via principal receipts until repaid.
Interest rate and currency risk

As with the majority of European covered bonds, there is potential for interest rate and currency mismatches, which could arise from
the different payment promises and durations made on the cover pool and the covered bonds.
Exhibit 8
Overview of assets and liabilities
WAL Assets (Years) WAL Liabilities (Years) Assets (%) Liabilities (%)
Fixed rate 4.9 7.0 85.5% 100.0%
Variable rate 1.1 n/a 14.5% 0.0%
WAL = weighted average life. The WAL is calculated for fixed rate mortgages loans based on the WAL of all principal cash flows assuming no loan prepayments and no loan prolongation.
n/a = not applicable
Following a CB anchor event, our model would separately assess the impact of increasing and decreasing interest rates on the expected
loss of the covered bonds, taking the path of interest rates that leads to the worst result. The interest rate and currency stresses used
over different time horizons are published in our Rating Methodology.
Aspects of this covered bond programme that are market-risk positive include:
» No currency risk. Currently, all the covered bonds and the cover pool are all denominated in CHF. The issuer has stated not to
introduce unhedged currency risk into the programme.
Aspects of this covered bond programme that are market-risk negative include:
» 85.5% of the cover pool are fixed rate assets. A potential sale of fixed-rate assets to meet payments due on covered bonds
following a CB anchor event could lead to a crystallisation of mark-to-market losses caused by interest rate movements upon issuer
default.
» There is some interest rate mismatch of assets and liabilities. 100% of the covered bonds are fixed rate and 85.5% of the cover
pool. There are no swaps in the programme.
Timely Payment Indicator

Our Timely Payment Indicator (TPI) assesses the likelihood that timely payments would be made to covered bondholders following a
CB anchor event, and thus determines the maximum rating a covered bond programme can achieve with its current structure while
allowing for the addition of a reasonable level of OC. We have assigned a TPI of Probable to these covered bonds.
Based on the current TPI of Probable, the TPI leeway for this programme is zero notches. This zero-notch leeway implies that we might
downgrade the covered bonds' rating because of a TPI cap if we were to lower the CB anchor, all other variables being equal.
The TPI-positive aspects of this covered bond programme include:
» High credit quality of the cover pool, consisting of prime residential mortgage loans, as reflected by the collateral score of 5.0%;
» All the covered bonds benefits, and all future series of covered bonds are expected to benefit, from a 12 month extension period;
» No currency risk and limited interest rate mismatches;
» Replacement of the servicer, cash manager and corporate services provider upon downgrade of the issuer below Baa3(cr);
» Upon loss of P-2(cr), the borrowers shall be directed to make all payments directly to a dedicated cover pool account in the name of
the guarantor and held at an account bank with at least a P-2 deposit rating;
» A dedicated liquidity reserve covers interest payments under the covered bonds and operating expenses of the guarantor for the
next three months after loss of A3(cr).
The TPI-negative aspects of this covered bond programme include:
» The repayment profiles of the covered bonds (bullet format) differ from the repayment profile of the cover pool and we expect
this mismatch to worsen as the issuer's credit strength deteriorates towards the CB anchor event. As a mitigating factor, based
on today's repayment profile, the Maximum Mismatch is with 0% significantly better than the average of EMEA covered bond
programmes;
» No 180-day liquidity buffer that would require the issuer to post liquid assets to the extend that the outgoing cash flows (e.g.
covered bond repayments) exceed the incoming cash flows from the cover pool in the next six months on a rolling basis.
» The level of systemic support may be lower compared to covered bonds which are governed by a dedicated covered bond law.
Additional analysis
Time subordination
After a CB anchor event, later-maturing covered bonds would be subject to time subordination. Principal cash collections may be used
on a first-come, first-served basis, paying earlier-maturing covered bonds before later-maturing covered bonds. Such payments could
result in the erosion of OC before any payments are made to later-paying covered bonds.
Governance considerations
Overall exposure to meaningful governance risks is low in this programme due to covered bonds’ dual recourse to both issuer and cover
pool and the consideration set out below.
The principal sources of governance for this programme are (i) key programme participants’ adherence to obligations; and (ii) the
operational and substantive provisions of the programme documents. In this programme, there are control mechanisms in place that
are designed to protect covered bondholders from mistakes, misallocation of cash flows and misappropriation of assets, and that
promote compliance with the covered bond structural setup and operational and reporting requirements.
In particular, we note that (i) the issuer is a regulated entity and maintains the cover pool risks on its balance sheet, incentivising it to
maximise cover pool value as owner and servicer; (ii) the cover pool monitor is a role prescribed in the programme documentation; (iii)
the programme documentation contains provisions addressing treatment of ineligible and non performing assets and contains detailed
reporting requirements; and (iv) there is a high level of legal certainty over the segregation of the cover pool and the parties’ respective
rights to it.
Cover pool description

Pool description as of 30 September 2020
The covered bonds are collateralized with a dedicated cover pool of high-quality assets. The cover pool consists of mortgage loans
secured on residential properties in Switzerland.
As of 30 September 2020, 94.1% of the mortgage loans are secured on apartments and single-family housing and 5.9% are secured on
buy-to-let multi-family properties. In each case there is direct personal recourse to the borrower.
On a nominal value basis, the cover pool assets total CHF 3.69 billion, which back CHF 2.07 billion in covered bonds, resulting in an OC
level of 78.3% on a nominal value basis. (For Valiant’s underwriting criteria, see “Appendix: Income underwriting and valuation”)
As Exhibit 9 shows, mortgage loans backed by apartments and single-family housing properties amount to CHF 3.47 billion. The
weighted average unindexed LTV is 64.9% and weighted average indexed LTV is 62.1%. All the assets are performing.
As Exhibit 11 shows, mortgage loans backed by multi-family housing properties amount to CHF 216.9 million. The weighted average
unindexed LTV is 67.3% and weighted average indexed LTV is 65.0%. All the assets are performing.
Exhibits 8 through 11 show more details about the cover pool characteristics.
Mortgage loans secured on apartments and single-family housing
Exhibit 9
Cover pool summary - Apartments and single-family housing
Overview Specific Loan and Borrower characteristics
Asset type: Residential Loans with an external guarantee in addition to a mortgage: n/d
Asset balance: 3,469,728,687 Interest only Loans 43.6%
Average loan balance: 486,775 Loans for second homes / Vacation: 1.9%
Number of loans: 7,128 Buy to let loans / Non owner occupied properties: 11.0%
Number of borrowers: 6,915 Limited income verified: 0.0%
Number of properties: 7,333 Adverse credit characteristics (**) 0.0%
WA remaining term (in months): 53
WA seasoning (in months): 66 Performance
Loans in arrears ( ≥ 2months - < 6months): 0.0%
Details on LTV Loans in arrears ( ≥ 6months - < 12months): 0.0%
WA unindexed LTV (*) 64.9% Loans in arrears ( ≥ 12months): 0.0%
WA Indexed LTV: 62.1% Loans in a foreclosure procedure: 0.0%
Valuation type: Market Value
LTV threshold: (***) 80.0% Multi-Family Properties
Junior ranks: n/d Loans to tenants of tenant-owned Housing Cooperatives: n/a
Loans with Prior Ranks: 0.0% Other type of Multi-Family loans n/a
(note *) may be based on property value at time of origination or further advance or borrower refinancing.
(note **) Typically borrowers with a previous personal bankruptcy or borrowers with record of court claims against them at time of origination
(note ***) The LTV threshold as used for ACT purposes does not consider second and third pillar pension fund assets
Exhibit 10
Cover pool characteristics - Apartments and single-family housing
Exhibit A
Balance per LTV band
The LTV numbers refer to 'netto LTV' considering in the value of second and third pillar pension fund assets
Unindexed LTV Indexed LTV
40% 37.1%
36.4%
35% 33.1%
31.9%
30%
25%
20%
16.8%
14.6%
15%
10.5%
10% 7.5%
6.9%
5.0%
5%
0.0% 0.2%
0%
Exhibit B Exhibit C
Percentage of Residential assets Interest rate type
40%
35.1% 35.0%
23.9%
20%
6.0%
0%
Residential
Assets
94.1%
Sources: Moody's Investors Service, issuer data Sources: Moody's Investors Service, issuer data
Exhibit D
LTV
% of the pool with Indexed LTV>80% Unindexed WA LTV Indexed WA LTV

80%
64.6% 64.6% 64.6% 64.9% 64.8% 64.9% 65.0% 64.9%
60%
61.9% 62.0% 62.7% 63.1% 62.8% 62.5% 62.0% 62.1%
40%
20%
3.5% 3.7% 2.0%

0.9% 1.8% 0.7% 0.2% 0.2%
0%
Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
Exhibit E
Main country regional distribution
45%
40% 38.1%
35%
30%
23.3%
25%
20% 15.8%
15% 12.2%
10% 7.9%
5% 1.8% 0.6% 0.3%

0%
Exhibit F
Seasoning (months)
45% 41.4%
40%
35%
30%
25% 23.2%
20%
15.5%
14.2%
15%
10%
5.7%
5%
0%
Mortgage loans secured on multi-family housing properties
Exhibit 11
Cover pool summary - Multi-family housing
Overview Specific Loan and Borrower characteristics
Asset type: Residential Loans with an external guarantee in addition to a mortgage: n/d
Asset balance: 216,906,830 Interest only Loans 26.6%
Average loan balance: 964,030 Loans for second homes / Vacation: 0.0%
Number of loans: 225 Buy to let loans / Non owner occupied properties: 0.0%
Number of borrowers: 218 Limited income verified: 0.0%
Number of properties: 229 Adverse credit characteristics (**) 0.0%
WA remaining term (in months): 50
WA seasoning (in months): 75 Performance
Loans in arrears ( ≥ 2months - < 6months): 0.0%
Details on LTV Loans in arrears ( ≥ 6months - < 12months): 0.0%
WA unindexed LTV (*) 67.3% Loans in arrears ( ≥ 12months): 0.0%
WA Indexed LTV: 65.0% Loans in a foreclosure procedure: 0.0%
Valuation type: Market Value
LTV threshold (***) 80.0% Multi-Family Properties
Junior ranks: n/d Loans to tenants of tenant-owned Housing Cooperatives: n/a
Loans with Prior Ranks: 0.0% Other type of Multi-Family loans: n/a
(note *) may be based on property value at time of origination or further advance or borrower refinancing.
(note **) Typically borrowers with a previous personal bankruptcy or borrowers with record of court claims against them at time of origination
(note ***) The LTV threshold as used for ACT purposes does not consider second and third pillar pension fund assets
Exhibit 12
Cover pool characteristics - Multi-family housing
Exhibit A
Balance per LTV band
Unindexed LTV Indexed LTV

70%
57.6%
60%
50% 47.1%
40%
30% 27.1%
22.1%
20%
12.4%
5.7% 7.6% 10.6%
10%
4.8% 4.8%
0%
Exhibit B Exhibit C
Percentage of Residential assets Interest rate type
60%
Residential MFH
5.9%
38.5%
40%
30.0%
22.4%
20%
9.1%
0%
Sources: Moody's Investors Service, issuer data Sources: Moody's Investors Service, issuer data
Exhibit D
LTV
% of the pool with Indexed LTV>80% Unindexed WA LTV Indexed WA LTV

80%
67.3%
60% 65.0%
40%
20%
0.0%
0%
Q3 2020
Exhibit E
Main country regional distribution
45%
40.6%
40%
35%
30%
25%
18.8%
20% 17.3%
15% 12.2% 11.1%

10%
5%
0.1%
0%
Exhibit F
Seasoning (months)
60%
52.8%
50%
40%
30% 25.3%
20%
9.5% 10.3%
10%
2.2%
0%
Mortgage loan underwriting and property valuation

Underwriting
Valiant relies on a sustainable affordability ratio to assess whether it would lend to a borrower. The affordability ratio is calculated by
dividing all expenses related to the mortgage (credit expenses) divided by the gross income. This ratio shall not be higher than 35% of
the gross income.
For calculating the credit expenses, Valiant takes into account payments under the mortgage loan (assuming the interest rate to be
at 5.0% to account for interest rate risk and normally 0.87% of the property value to account for loan repayment3), payments under
any junior ranked mortgage loan, other debt with a maturity of more than one year and maintenance costs assumed at 0.5% of the
property value. For more details, see the appendix on income underwriting.
For calculating the gross income, Valiant considers the borrower's sustainable gross income. Although there is always full recourse
to the borrower (being a natural person), in case of buy-to-let situations the loan underwriting rests in the first place solely on the
sustainable income generated by the property (assuming property expenses at 0.5% of the property value and accounting for structural
vacancies as permanently lost income). Should the property income itself prove insufficient to service the mortgage loan, then the
borrower's income and expenses are considered in the loan underwriting.
Valiant's decision on granting a loan is not solely based on meeting the requirements laid out in the issuer's credit lending policy,
but may also be subject to exceptions to the policy. In these cases, the loan application is part of a tighter screening and monitoring
regime.
Income verification
The issuer does not grant self-certified loans. For all loan applications, the borrowers' income is verified by relevant documentation.
Valuation
Property valuations are in most of the cases based on a standardized hedonic valuation approach (the valuation model). The valuation
model, which is also used by most lenders in the Swiss residential mortgage loan market, utilizes current real estate transaction data
(rather than appraisals) and historical relationships, computed through multiple regression analysis between property and location
related variables, through which a valuation is derived for a specific property based on the specific characteristics and location of the
property.
Valiant allows the appreciation or depreciation of the modeled property value of up to 10%. Any adjustment beyond is subject to
additional approval instances. However, regardless of any adjustment made, the final property market value for lending purposes
(Belehnungswert) is capped at the actual purchase price.
LTV
The maximum LTV according to the eligibility criteria is set at 80% of the property's market value at the time a mortgage loan is added
to the cover pool. The Swiss Banking Association stipulates the linear amortisation of any loan to 67% LTV within 15 years4, but before
the retirement of the borrower. The borrowers may amortize directly or indirectly by paying into the second and third pillar pension
funds. Such funds can be pledged to secure mortgage loans (see 'accessory preferential claims'). Valiant also checks if the borrower's
affordability of the loan is also positive during retirement.
Valiant reports LTV ratios under consideration of accessory preferential claims by adding the assets standing to the second and third
pillar pension fund to the collateral value where such accessory preferential claims are transferred to the guarantor by way of security.
For further information on Valiant's underwriting criteria, see Appendix: Income Underwriting and Valuation.
Substitution risk
Exposure to decisions made by the issuer in its discretion as manager of the cover pool creates additional risk. For example, before a CB
anchor event, the issuer may remove assets from the cover pool and/or add new assets to the cover pool. Such actions could negatively
affect the value of the cover pool.
As with most covered bonds in Europe, there are few contractual restrictions on the future composition of the cover pool, creating
substitution risk. Mitigants to substitution risk include (i) the eligibility criteria set forth under the programme; and (ii) the fact that the
cover pool composition will be monitored.
Cover pool eligibility criteria
The eligibility criteria in respect of the mortgages assigned at the time of the transfer to the cover pool include (non-exhaustive list):
» Each borrower is a natural person(s);
» Each financed property is for owner-occupied usage (except multi-family properties);
» Each mortgage is denominated in Swiss francs;
» Each relevant mortgaged property is located in Switzerland;
» Each relevant mortgage property is of a residential housing character (no commercial real estate);
» Each mortgage loan is not delinquent for more than 90 days;
» Each mortgage has a maximum gross LTV ratio of 80% of the property market value.
Cover pool monitor

As required under the transaction documentation, an independent cover pool monitor has been appointed. The cover pool monitor is
responsible for checking the calculation of the asset coverage test and the interest coverage test on an annual basis.
Cover pool analysis

Our credit analysis of the pool takes into account specific characteristics of the pool, as well as legal risks.
Primary cover pool analysis

The result of the cover pool analysis is the collateral score. We calculate the collateral score using a scoring model for the residential
mortgages in the cover pool. Our analysis takes into account, among other things, the impact of concentration on borrower, regional
and country levels, as well as the different types of properties securing the loan.
For this programme, the collateral score of the current pool is 5.0%, similar to the average collateral score of 5.0% in other Swiss
mortgage covered bonds. (For details, see “Moody's related publications - Moody’s Global Covered Bonds Sector Update, Q3 2020”)
The cover pool comprises 7,353 residential mortgage loans for a total outstanding balance of around CHF 3.69 million.
From a credit perspective, we view the following characteristics of the residential mortgages loans as positive:
» Strong+ macro profile of Switzerland benefitting from an open, well-diversified and competitive economy with very high
institutional and government financial strength and long-standing sociopolitical stability;
» The pool has moderate LTVs, albeit one needs to consider that Switzerland's house prices have risen significantly for the largest part
of the last ten years;
» All loans are with direct recourse to the borrower, a natural person that owns or controls the property;
» The large majority of the mortgages secured on owner-occupied properties;
» All loans in the cover pool are first ranking;
» All the loans are performing.
From a credit perspective, we view the following portfolio characteristics of the residential mortgage loans as negative:
» Rising indebtedness of corporates and households to levels among the highest of any economy globally, mitigated by the effects
from high wealth and high debt affordability at the current low interest rate levels. The stronger economic imbalances could
increase the potential downside risks to the cover pool's credit quality;
» 42.6% of the total cover pool are interest only loans;
» Regional concentration as 38% of the total cover pool are located in Berne region of Switzerland
Additional cover pool analysis

Environmental considerations
Overall exposure to meaningful environmental risks is low in this programme due to the issuer’s liability to make payment on the
covered bonds and:
» In respect of physical risks to the cover pool, there is some concentration risk with 38% in the Berne region. In addition to
geographical diversification, physical environmental factors are mitigated by mandatory possession of insurance in line with market
practices.
» In respect of regulatory risk, we expect that over time properties that do not meet climate-aligned standards for energy efficiency
or carbon emissions will face regulatory sanctions and value impairment. However, we expect much of this risk to be gradually
absorbed into the periodic updating of property valuations and income underwriting or ongoing capex. This will impact key credit
metrics such as LTVs.
In the event of shocks in connection with regulation or physical hazards, the impact on property collateral will be partly mitigated by
borrowers’ liability to repay mortgage loans regardless of property value.
Social considerations
The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue
to disrupt economies and credit markets across sectors and regions. Our analysis has considered the effect on the performance of
covered bonds from the current weak Swiss economic activity and a gradual recovery for the coming months. Although an economic
recovery is underway, it is tenuous, and its continuation will be closely tied to containment of the virus. As a result, the degree of
uncertainty around our forecasts is unusually high. We regard the coronavirus outbreak as a social risk under our ESG framework, given
the substantial implications for public health and safety.
The coronavirus outbreak aside, the overall exposure to social factors is moderate for this programme. Covered bondholders benefit
from the issuer’s liability to make payment on the covered bonds, meaning the bondholders will not be directly exposed to social
factors affecting the cover pool unless the issuer defaults. Misconduct, poor handling of data security and customer privacy breaches by
lenders are the most significant social risks that may in due course affect the credit quality of the cover pool, although lenders’ financial
and operational flexibility and track record of adjusting to social issues may mitigate this. In addition, the diversified nature of the cover
pool is a mitigant to exposure to social factors.
Social factors that potentially affect the cover pool have varied implications. Social risks can arise from changing demographic trends
such as aging, urbanization, an increase in telecommuting and flight from cities, population declines or ways of living trends in general
that impact the supply or demand for housing in particular areas, which can reduce home values. Societal and demographic trends will
be relevant but typically develop over an extended timeframe that smooths out materiality for expected loss.
Social issues may also be driven also by a political agenda related to housing and consumer protection, particularly in down cycles,
creating pressure on recovery values. Borrower-friendly legislation as a reaction to consumer activism can affect both the underwriting
and the servicing of mortgage loans in the cover pool. Social policy-driven decisions in Switzerland, such as lowering underwriting
standards at government-sponsored enterprises to increase homeownership, would reduce the credit quality of the cover pool.
Commingling risk
Valiant acts as servicer for the mortgage loans in the cover pool. Direct mortgage payments are paid to the servicer’s general bank
account and are commingled with other servicer funds. Commingling risk is mitigated by the following features: (i) the servicer's
obligation to use reasonable endeavours to replace itself within 90 days if the servicer's CR assessment is downgraded below Baa3(cr)
(ii) upon breach of the P-2(cr) of Valiant, the underlying borrowers will be notified of the assignment of the mortgage loans to the
guarantor and are required to make payments under their loan obligation only to a dedicated cover pool bank account in the name of
the guarantor and held at a financial institution with at least a P-2 deposit rating.
Claw-back risk
Claw-back risk may arise upon the insolvency of the issuer, who transfers collateral to the guarantor. Clawback occurs where the
transfer of assets is challenged by the issuer’s administrator on certain legal grounds. We have been provided with legal comfort that
the transfer of the cover assets by way of security will not be subject to potential claw-back by an insolvency administrator over the
estate of the issuer.
Set-off
We understand that mortgage debtors can validly waive their right to set off all payments due under a mortgage liabilities contract
governed by Swiss law against any deposits. Valiant has confirmed that the debtors of all mortgage claims in the cover pool have
waived their right to set off and that Valiant itself has not granted any mortgagor the right to set off. We further understand that this
set-off waiver is upheld in an insolvency scenario of Valiant and that the transfer of the mortgage claim to Valiant Hypotheken AG,
by way of security, does not harm the validity of the set-off waiver signed by the mortgage debtor. However, we understand that the
validity of the set-off waiver has not been tested in front of a Swiss court yet.
Comparables
Exhibit 13
Valiant Bank AG - Mortgage Covered Bonds and other deals
Valiant Bank AG - Mortgage Raiffeisenverband Salzburg - Deutsche Bank AG - Mortgage TSB Bank plc - Mortgage Covered HSBC Bank Canada Legislative
PROGRAMME NAME
Covered Bonds Mortgage Covered Bond Covered Bonds Bonds Global Covered Bond Programme
Overview
Programme is under the law Covered Bond Act Pfandbrief Act

Main country in which collateral is based Switzerland Austria Germany UK Canada
Country in which issuer is based Switzerland Austria Germany UK Canada
Total outstanding liabilities CHF 2,068,000,000 € 814,500,000 € 11,977,000,000 £1,250,000,000 CAD 5,230,300,000
Total assets in the Cover Pool CHF 3,688,008,789 € 1,193,859,000 € 15,658,950,836 £1,821,230,411 CAD 12,136,238,482
Raiffeisenverband Salzburg
Issuer name Valiant Bank AG Deutsche Bank AG TSB Bank PLC HSBC Bank Canada
eGen
Issuer CR assessment A3(cr) A3(cr) A3(cr) A3(cr) A2(cr)
Group or parent name Valiant Holding AG n/a n/a TSB Banking Group plc HSBC Bank Canada
Group or parent CR assessment n/a n/a n/a n/a A2(cr)
Main collateral type Residential Residential Residential Residential Residential
Residential 100%, Commercial Residential 61%, Commercial Residential 87%, Commercial Residential 100%, Commercial Residential 100%, Commercial
Collateral types 0%, Public Sector 0%, 39%, Public Sector 0%, 7%, Public Sector 0%, 0%, Public Sector 0%, 0%, Public Sector 0%,
Other/Supplementary assets 0% Other/Supplementary assets 0% Other/Supplementary assets 6% Other/Supplementary assets 0% Other/Supplementary assets 0%
Ratings
Covered bonds rating Aaa Aaa Aaa Aaa Aaa

Entity used in Moody's EL & TPI analysis Valiant Bank AG Raiffeisenverband Salzburg Deutsche Bank AG TSB Bank plc HSBC Bank Canada
CB anchor CR Assessment + 0 notches CR Assessment + 1 notch CR Assessment + 1 notch CR Assessment + 1 notch CR Assessment + 0 notches
CR Assessment A3(cr) A3(cr) A3(cr) A3(cr) A2(cr)
SUR / LT Deposit n/a n/a A3 n/a n/a
Unsecured claim used for Moody's EL analysis Yes Yes Yes Yes No
Value of Cover Pool
Collateral Score 5.0% 8.8% 5.4% 5.0% 5.0%

Collateral Score excl. systemic risk 4.0% n/a 4.4% 3.7% n/a
Collateral Risk (Collateral Score post-haircut) 3.4% 5.9% 3.6% 3.4% 3.4%
Market Risk 10.3% 11.8% 13.2% 11.1% 9.7%
Over-Collateralisation Levels
Committed OC* 11.5% 0.0% 2.0% 12.4% 10.5%
Current OC 78.3% 58.9% 41.8% 45.7% 132.0%
OC consistent with current rating 11.5% 14.0% 12.5% 10.5% 10.0%
Surplus OC 66.8% 44.9% 29.3% 35.2% 122.0%
Timely Payment Indicator & TPI Leeway
TPI Probable Probable High Probable Probable

TPI Leeway 0 1 2 1 1
Reporting date 30 September 2020 30 September 2020 30 September 2020 30 September 2020 30 June 2020
*We consider this level of OC as committed according to our methodology even though the level of OC provided via the asset cover test might be higher because the issuer could reduce
the level of OC down to this level without a rating impact on our covered bond rating.
Sources: Moody's Investors Service, issuer
Methodology and monitoring

The primary methodology we use in rating the issuer’s covered bonds is “Moody’s Approach to Rating Covered Bonds”, published in
October 2020. Other methodologies and factors that may have been considered in the rating process can also be found on http://
www.moodys.com. In addition, we publish a weekly summary of structured finance credit, ratings and methodologies, available to all
registered users of our website, at www.moodys.com/SFQuickCheck.
We expect the issuer to deliver certain performance data to us on an ongoing basis. In the event that this data is not made available to
us, our ability to monitor the ratings may be impaired. This lack of data availability could negatively affect the ratings or, in some cases,
our ability to continue to rate the covered bonds.
Appendix: Income underwriting and valuation

Exhibit 14
Income underwriting
1. Income Underwriting
1.1 Is income always checked? Yes
1.2 Does this check ever rely on income stated No, always verified (annual income statement of employer, inflows to Valiant accounts, etc.)
by the borrower (“limited income verification”)?
1.3 Percentage of loans in Cover Pool that None

have limited income verification
1.4 If limited income verification loans are in the n/a
Cover Pool, describe what requirements lender
has in place for these loans.
1.5 Does income in all cases constrain the Yes
amount lent (for example through some form of Income It is not only income or the affordability analysis that determines the loan amount (or debt
Sufficiency Test (“IST”)? capacity), although income is the most important factor for assessing the borrowing capacity of
private individuals.
However, there are some additional criteria for decision-making, such as the loan-to-value ratio
(LTV), the repayment options, the credit rating and additional information from the risk profile and
rating tool (details of borrowing capacity and creditworthiness).
1.6 If not, what percentage of cases are exceptions. n/a
For the purposes of any IST

1.7 Is it confirmed income after tax is sufficient Yes. Valiant bases calculations on gross income (before deduction of taxes and social security
to cover both interest and principal? contributions).
Total costs divided by relevant total gross income may not exceed 35 per cent.
The total costs include the charging of a calculatory interest rate as per 1.10 and compulsory
repayment as per 1.8 or 1.9 as well as ancillary costs (“owner’s costs”), additional debt interest,
gains/losses on real estate investments (surpluses/ shortfalls on third-party properties) and other
relevant costs (e.g. leases, consumer loans).
1.8 If so over what period is it assumed In accordance with SBA guidelines as a basic principle, i.e. within 15 years (with the Bank’s
principal will be paid (typically on an annuity internal regulations being more stringent) and by retirement at the latest. Repayment at least
basis)? Any exceptions? until the mortgage loan is equal (or less) than a LTV of 67 per cent (as part of a 1st mortgage).
1.9 Does the age of the borrower constrain Yes. See answer 1.8. By retirement at the latest as part of a 1st mortgage. Retirement age is
the period over which principal can be amortised? currently 65 for men and 64 for women.
1.10 Are any stresses made to interest rates Yes. Affordability is calculated using a calculatory interest rate of at least 5 per cent; no
when carrying out the IST? If so when and for calculations are done using actual interest rates. To be used for all products.
what type of products?
1.11 Are all other debts of the borrower taken into Yes. All other medium- to long-term debts that cannot be attributed to the cost of everyday living
account at point loan made? are to be disclosed. These will be lease instalments and consumer loan instalments with terms
longer than one year.
1.12 How are living expenses of the borrower calculated? Mortgage expenses and related property expenses may not exceed 35 per cent of gross income
And what is the stated maximum percentage (otherwise this would be an exception to policy). In other words, 65 per cent of gross income
of income that will be relied on to cover debt must be available to cover all remaining costs. Mortgage expenses and related property
payments? expenses include the costs listed in 1.7.
Other comments
Source: Issuer
Exhibit 15
Valuation
2. Valuation
2.1 Are valuations based on market or The values Valiant calculates for properties are based on benchmark figures (traded market
lending values? values = transaction prices) for similar or identical properties ("hedonic model"). The value
Valiant sets indicates what is currently being paid on the market for similar or identical
properties.
Owner-occupied residential property is valued using IAZI's hedonic model. IAZI is one of three
major providers of databases of benchmark figures on the Swiss market: www.iazi.ch
As a general principle, however, we apply the lower of cost or market value for the first three
years after purchase. The underlying value relevant for financing is either the actual purchase
price/ investment cost or the benchmark figure calculated using the IAZI model, whichever is
lower. The IAZI value calculated may not be inflated by any more than 10 per cent (IAZI
valuation tolerance ranges).
2.2 Are all or the majority of valuations carried No.

out by external valuers? Valuations are prepared internally by the client advisor after inspecting the property and
confirmed using IAZI’s hedonic model. IAZI’s valuation tool makes sure information is logged
correctly with detailed instructions on filling out the data fields.
There are no commercial ties between Valiant Bank and IAZI. We pay a licence fee to use the
database.
10 per cent of all valuations undertaken by the client advisor are checked by means of random
sampling and sanctions are imposed in the event of infringements.
2.3 How are valuations carried out where Valuations by external valuers are only carried out very rarely in exceptional cases. These
external valuer not used? valuers have been accredited by Valiant.
All valuations by external property valuers are checked for plausibility by Valiant’s internal
valuers.
2.4 What qualifications for external valuers require? Our accredited property valuers are proven real estate experts carefully selected by Valiant. Five
institutions are approved at present in accordance with our current regulations. Valiant ensures
to check that they have a nationally recognised qualification: an official diploma in property
valuation or a Certificate of Advanced Studies or Master's in Real Estate Management from a
university of applied sciences.
2.5 What qualifications do internal valuers require? Any internal property valuers recruited are required to have the following qualifications: an official
diploma in property valuation or a Certificate of Advanced Studies or Master's in Real Estate
Management from a university of applied sciences.
N.B.: Valiant uses the following professional hierarchy for estimates:
1a) Internal real estate experts => Are separate from the sales team (do not work in the same
area as the client advisors).
1b) External real estate experts.
2) Financing advisors (client advisors) – always with accreditations for the relevant type of
property valuation.
2.6 Do all external valuations include an internal Internal regulations require every property to be inspected inside and out and documented with
inspection of a property? photographic evidence, regardless of whether this is done by the external or internal property
valuer or by the client advisor.
2.7 What exceptions? There is only one exception to the policy: properties in the portfolio whose last inspection was no
more than ten years ago do not need to be reinspected when they are revalued.
2.8 Do all internal valuations include an internal Please note 2.6

inspection of a property?
2.9 What exceptions? Please note 2.7

Other comments
Source: Issuer
Moody's related publications

Rating Methodology
» Moody's Approach to Rating Covered Bonds, October 2020 (1234823)
Special Comments
» Covered Bonds – Global - Sector Update - Q3 2020: Covered bonds benefit from systemic support but face post-pandemic policy
shifts, November 2020 (1252116)
» Banking System Outlook: Outlook remains stable despite coronavirus disruption to Swiss economy, March 2020
» Switzerland: Macro profile: Strong+ (January 2020)
» Tighter investment property lending is credit positive for Swiss banks, covered bonds and RMBS, January 2020
» Swiss regional banks can weather house price shocks, less cushion for Raiffeisen, August 2018
Performance Overview
» Valiant Bank AG - Mortgage Covered Bonds, December 2020 (SF494444)
Credit Opinion
» Valiant Bank AG
Webpages
» Covered Bonds: www.moodys.com/coveredbonds
» Covered Bond Legal Frameworks: www.moodys.com/Pages/CoveredBondLegalFrameworks.aspx
To access any of these reports or webpages, click on the entry above. Note that these references are current as of the date of
publication of this report and that more recent reports may be available. All research may not be available to all clients.
Endnotes
1 The issuer may invest up to 15% of the total cover pool balance in authorised investments (Autorisierte Investments). These are defined as investments (i)
with a maturity being not longer than the next maturing covered bond and a long term rating of A2 (Moody's) or A (Fitch/S&P) or (ii) investments with a
maturity beyond 6 months with a long term rating of Aaa (Moody's) and AAA (Fitch/S&P).
2 Until breach of the P-1(cr) the guarantor is required to pass back any difference between the guarantor fee received and the covered bond differential paid
(the collateral differential)
3 SBA guidelines to amortise the mortgage down to at least 67% LTV over 15 years
4 This 67% LTV limit is calculated on a net-basis, taking second and third pillar pension fund assets into account
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Moody's Update To New Issue Report, 3 March 2021

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COVERED BONDS

All data in the report is as of 30 September 2020 unless otherwise stated

Entity used in Moody's TPI analysis: Valiant Bank AG

Total Covered Bonds Outstanding: CHF 2,068,000,000

Intra-group Swap Provider: n/a

Source: Moody's Investors Service, issuer data

Sources: Moody's Investors Service, issuer data

Source: Moody's Investors Service, issuer data

Covered bond description

Guarantor event of default (Garanten-Verzugsereignis) and acceleration

Liquidity reserve fund

Accessory preferential claim

The asset coverage test (ACT)

The interest coverage test (ICT)

The amortisation test

Covered bond analysis

(See “Moody's related publications: Switzerland Macro Profile: Strong+”)

The refinancing-positive aspects of this covered bond programme include:

The refinancing-negative aspects of this covered bond programme include:

Interest rate and currency risk

Timely Payment Indicator

The TPI-positive aspects of this covered bond programme include:

» No currency risk and limited interest rate mismatches;

The TPI-negative aspects of this covered bond programme include:

Cover pool description

Mortgage loans secured on apartments and single-family housing

Sources: Moody's Investors Service, issuer data

% of the pool with Indexed LTV>80% Unindexed WA LTV Indexed WA LTV

64.6% 64.6% 64.6% 64.9% 64.8% 64.9% 65.0% 64.9%

3.5% 3.7% 2.0%

Sources: Moody's Investors Service, issuer data

5% 1.8% 0.6% 0.3%

Sources: Moody's Investors Service, issuer data

Sources: Moody's Investors Service, issuer data

Mortgage loans secured on multi-family housing properties

Unindexed LTV Indexed LTV

Sources: Moody's Investors Service, issuer data

% of the pool with Indexed LTV>80% Unindexed WA LTV Indexed WA LTV

Sources: Moody's Investors Service, issuer data

15% 12.2% 11.1%

Sources: Moody's Investors Service, issuer data

Sources: Moody's Investors Service, issuer data

Mortgage loan underwriting and property valuation

» Each borrower is a natural person(s);

» Each financed property is for owner-occupied usage (except multi-family properties);

» Each mortgage is denominated in Swiss francs;

» Each relevant mortgaged property is located in Switzerland;

» Each mortgage loan is not delinquent for more than 90 days;

Cover pool monitor

Cover pool analysis

Primary cover pool analysis

» The large majority of the mortgages secured on owner-occupied properties;

» All loans in the cover pool are first ranking;

» All the loans are performing.

» 42.6% of the total cover pool are interest only loans;

Additional cover pool analysis

Programme is under the law Covered Bond Act Pfandbrief Act

Covered bonds rating Aaa Aaa Aaa Aaa Aaa

Collateral Score 5.0% 8.8% 5.4% 5.0% 5.0%

TPI Probable Probable High Probable Probable

Methodology and monitoring

Appendix: Income underwriting and valuation