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06 Jul 2004
MOODY'S COMMENTS ON GERMAN PUBLIC SECTOR BANKS AFTER JULY 2005: FOCUS SHIFTS TO SUPPORT, COOPERATION AND SOLIDARITY WITHIN THE SECTOR
London, 06 July 2004 -- In a report just published, Moody's Investors Service commented
on the status of the support mechanism ("Haftungsverbund"),
cooperation, cohesion and solidarity among German public sector
banks which are part of the savings banks group ("Sparkassen-Finanzgruppe"),
comprising savings banks, Landesbanken and Landesbausparkassen.
In view of the phasing out of the guarantee mechanisms (Anstaltslast and
Gewaehrtraegerhaftung) for Landesbanken and savings banks, this
report assesses possible rating implications of the support mechanism
on the ratings currently assigned to some of its member banks.
Moody's said that since the German Sparkassen-Finanzgruppe
is a decentralised banking group without a centralised holding structure,
the possibility of assigning a certain type of rating for all the group
members depended on the ability and the willingness of the member banks
to support each other.
The report, authored by Johannes Wassenberg, Vice President
with Moody's in London, analyses the existing support mechanism,
stating that on its own it does not warrant considering the savings banks
group as one economic entity, to which a single group rating could
be assigned. Furthermore, in its report Moody's also
assesses the importance of additional factors such as the cooperation,
solidarity and cohesion in the sector. Moody's believes that
these factors also need to be taken into account before the conclusions
of the willingness and likelihood of support and its impact on the assigned
ratings can be made.
Summarising the analysis, Moody's believes that for savings
banks the support mechanism in conjunction with the high degree of cooperation
and cohesion among these banks in effect limits the expected loss that
a potential investor or depositor would face. In light of the obligation
(in the form of Gewaehrtraegerhaftung) that savings banks - who
in most cases are also owners of the Landesbanken - have to support
the Landesbanken, Moody's also believes that savings banks
would, for the foreseeable future, support Landesbanken,
and, their small size notwithstanding, Moody's would
also expect support for Landesbausparkassen, given their strong
integration into the savings banks' franchise.
Due to the strong likelihood of support availability within the group,
Moody's believes that this effectively limits the downside risk
for the members of the group, which could best be reflected in a
rating floor for the group of Sparkassen, Landesbanken, and
Landesbausparkassen. In line with such a rating floor and in view
of the substantially different credit profiles of many banks, and
also in view of shortcomings and limited support automatism of the "Haftungsverbund"
Moody's also believes that it is possible for individual banks which
show significantly stronger credit fundamentals to shelter these stronger
fundamentals against a possible support requirement from the "Haftungsverbund".
Consequently, reflecting this higher credit strength, these
banks could be rated higher than such a potential "floor",
However, Moody's concluded that it did not believe that the
group structure as shaped by the Haftungsverbund and the degree of cooperation,
cohesion, centralisation or standardisation was sufficiently strong
that the savings banks group could be considered as one single economic
entity to which one single group rating could be assigned.
Samuel S. Theodore
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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