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Global Credit Research - 23 Mar 2010
Tokyo, March 23, 2010 -- Moody's Investors Service has released a new report, which
explains Moody's thinking behind the application of the revised Guidelines
for Rating Bank Hybrids and Subordinated Debt published in November 2009
to Japanese banks' hybrid securities ratings in light of key characteristics
of the Japanese banking system. These characteristics involve the
unique behaviour of hybrid securities which have been previously experienced
by the Japanese banking system.
"Hybrid securities ratings will be linked with the stand-alone
intrinsic strength of the individual bank as expressed through Moody's
Bank Financial Strength Ratings. This is in contrast to our previous
practice of using a bank debt rating, which incorporates systemic
and other forms of external support," says Moody's.
The report notes how Japan's resolution framework for capital distressed
banks is based on the recognition of the acute practical difficulties
involved in liquidating a bank during a systemic crisis, given the
impact on the financial system and on the broader economy. Consequently,
a dysfunctional banking system caused by possible bank liquidation or
defaults is not in the interest of any Japanese entity, including
the government, corporates and depositors. As a result,
while there have been many individual bank 'failures' in Japan,
there have been no bank deposit or publicly issued debt defaults as such
(including on subordinated debt).
Such a strong assessment of solid resolution and capitalisation framework
available in Japan for capital stressed banks is the major reason why
Moody's has decided to incorporate systemic support in the ratings of
Japanese banks' junior subordinated debts. However, Moody's
has decided to eliminate the systemic support element from non-cum
preferred securities ratings, as these are going concern loss absorption
instruments in a stressed situation before liquidation, as well
as the experiences of dividend suspensions for such securities in Japan.
"We think investors in Japanese junior subordinated debt and preferred
securities could be at greater risk over the longer term. The Japanese
banking system may also come under pressure to emulate other systems with
regard to the sharing of losses with investors in such securities,"
says Moody's.
More importantly, new and stringent capital guidelines with regard
to quality of capital, will increasingly pressure Japanese banks
to reduce their reliance on such hybrid securities. Moody's expects
these hybrid securities, including preferred and junior subordinated,
to increasingly be repurchased or called by banks, an indication
of its declining relevancy for Japanese banks. Such signs have
already emerged in connection with the new issue of common stock by Japanese
banks, says the report.
The report, entitled, "Moody's Assessment of Japanese Banks'
Hybrid Securities and Subordinated Debt," can be found at www.moodys.com.
NOTE TO JOURNALISTS ONLY: For more information please contact New
York Press Information +1-212-553-0376;
EMEA Press Information in London +44-20-7772-5456;
Juan Pablo Soriano in Madrid +34-91-310-1454;
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Eric de Bodard in Paris +33-1-5330-1020;
Detlef Scholz in Frankfurt +49-69-707-30-700;
Mardig Haladjian in Limassol +357-25-586-586;
Alex Sazhin in Moscow +7-495-228-60-60;
Petr Vins in Prague +4202 2422 2929; Tokyo Press Information
+813-5408-4110; Hilary Parkes in Toronto +1-416-214-1635;
Hong Kong Press Information +852-2916-1150; Hector
Lim in Sydney +612 9270 8102; Luiz Tess in São Paulo
+5511-3043-7300; Alberto Jones Tamayo in Mexico
City +5255-1253-5700; Daniel Rúas in Buenos
Aires +54 11-4816-2332 ext. 105; Leon Claassen
in Johannesburg +27-11-217-5470; Jehad
el-Nakla in Dubai +971 4 401 9536; or visit our web site
at www.moodys.com
Tokyo
Mutsuo Suzuki
Senior Vice President - Regional Credit Officer
Financial Institutions Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Tokyo
Minoru Kubota
Managing Director
Financial Institutions Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Moody's released report for the rating change of Japanese banks' hybrid securities
No Related Data.
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