A housing association has been downgraded by the Regulator of Social Housing to a G2 governance rating.

The Regulator said that Mount Green Housing Association needs to “strengthen its risk management, including its approach to stress testing.”

The judgement adds: “Mount Green’s financial performance is weak and forecast to remain so in the short term. The provider’s stress testing shows that it is sensitive to relatively small changes in costs and income, with several scenarios resulting in a breach of its interest cover covenant.

“To ensure that the board is appropriately sighted on the material exposures which Mount Green needs to manage, the provider needs to develop a more robust and comprehensive risk management framework.

“A key element of these improvements will involve enhancing mitigation strategies for stress scenarios and clarifying the circumstances in which they would be triggered.”

The organisation did keep its V2 rating for viability, with the Regulator assured that Mount Green “complies with the financial viability elements of the Governance and Financial Viability Standard”.

However, the judgement does go on to say: “While Mount Green has the financial capacity to deal with some exposures, it has material risks and it needs to manage these to support continued compliance. The provider reported a deficit for the year ended March 2021 and low headroom against its interest cover covenant.

“For the short to medium term, Mount Green’s business plan is forecasting limited capacity, with weak financial operating performance and continuing low headroom against its interest cover covenant.

“During this period, while Mount Green is no longer exposed to open market sales, it is reliant on fixed asset disposals and first tranche sales to support financial performance and covenant headroom.”

Other ratings given out today by the Regulator include retentions of G1/V1 grades for Golden Lane Housing, Eden Housing Association and One Vision Housing.