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Related Issuers
Rating Action:

Moody's downgrades Sparebanken Vest's subordinated debt ratings; stable outlook (Norway)

Global Credit Research - 24 May 2012

London, 24 May 2012 -- Moody's Investors Service has today downgraded the subordinated debt and junior subordinated MTN ratings of Sparebanken Vest to Baa3(hyb) from A3 and (P)Baa3 from (P)Baa2, respectively. The non-cumulative Tier 1 securities Ba1(hyb) rating was affirmed. The bank's standalone financial strength and long term and short term senior debt and deposit ratings are not affected by this rating action.

The actions conclude the review initiated on 29th November 2011, when Moody's placed on review for downgrade the ratings of the subordinated and junior subordinated debt of all Norwegian banks, together with other European countries where the subordinated debt incorporates some ratings uplift from Moody's assumptions of government support. (See Moody's Special Comment "Reassessment of Government Support Assumptions in European Bank Subordinated Debt" for further information). All ratings continue to carry a stable outlook.

For additional information on bank ratings, please refer to the webpage containing Moody's related announcements http://www.moodys.com/bankratings2012

RATINGS RATIONALE

The rating action reflects Moody's view that the possibility of losses being imposed on these instruments outside of liquidation has risen to a level which is incompatible with any remaining uplift. Moody's acknowledges that the current legal and regulatory framework remains ostensibly supportive. However, Moody's believes the probability of systemic support for these instrument is substantially lower than that for deposit and senior debt, given the lesser contagious impact of such losses on the financial system.

Sparebanken Vest's subordinated (dated) and junior subordinated (undated) debt instruments are now rated two notches below Sparebanken Vest's baa1 adjusted BCA (which is the same as its BCA). There is no coupon deferral option for subordinated debt while the issuer remains a going concern but junior subordinated debt features a coupon skip mechanism, which requires coupon suspension on a cumulative basis if a minimum regulatory capital trigger is breached. The wider notching compared to similar instruments issued by banks in other Nordic countries primarily reflects the ability of rated Norwegian issuers such as Sparebanken Vest to permanently write-down principal in a going concern scenario if net assets are less than 25% of share capital and after the bank's share capital has been fully written down.

Sparebanken Vest's Tier 1 securities continue to be rated three notches below Sparebanken Vest's adjusted BCA. They are deeply subordinated, as they are senior only to equity. The loss absorption for Tier 1 securities stems from the non-cumulative coupon skip mechanism while the issuer remains a going concern. Coupon skip is mandatory upon the breach of minimum regulatory capital requirements or if the issuer does not have sufficient available distributable funds (balance-sheet trigger). The securities also feature a permanent principal write-down if the share capital has been reduced to zero and a temporary principal write-down if capital falls below the regulatory minimum.

After today's rating action, Sparebanken Vest's subordinated debt ratings no longer include systemic support uplifts, reflecting Moody's view that systemic support for subordinated debt may no longer be sufficiently predictable or reliable to be a sound basis for incorporating uplift into Moody's ratings. We removed systemic support uplift from Norwegian junior subordinated and non-cumulative Tier 1 securities' ratings in February 2010.

We have also attached a hybrid (hyb) indicator to the dated subordinated debt of Sparebanken Vest.

RATING METHODOLOGIES

The methodologies used in this rating were Bank Financial Strength Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: Global Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Sparebanken Vest, headquartered in Bergen, Norway, reported total assets of NOK121.5 billion (EUR16 billion) at the end of March 2012.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The rating has been disclosed to the rated entity or their designated agents and issued with no amendment resulting from that disclosure.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a ratings.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Simon Harris
MD - Financial Institutions
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Gregory Winans Bauer
MD - Global Banking
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades Sparebanken Vest's subordinated debt ratings; stable outlook (Norway)
No Related Data.

 

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