MOODY’S UPGRADES TO P-1 FROM P-2 SHORT-TERM RATINGS OF SEVERAL EUROPEAN BANKS, MAINTAINS THEIR A3 LONG-TERM RATINGS AND STABLE OUTLOOKS.
Moody’s upgraded to Prime-1 from Prime-2 the short-term ratings of several European and US banks, while affirming their A3 ratings and stable outlooks. Similar rating actions are being announced through separate press releases for several banks in the Asia-Pacific region and in the United States. These rating actions are consistent with Moody’s belief that under specific circumstances P-1 ratings for banks are compatible with A3 long-term ratings. More details about this opinion were expressed in a Moody’s report titled “Bank Liquidity Risk and Short-term Bank deposit Ratings” and published in January 2003.
Specifically, noted Moody’s, the banks covered by these short-term rating upgrades are institutions based in developed banking markets and are characterised by relative stability and predictability of their fundamentals as defined by a low single-A long-term rating. These fundamentals include a core defensible franchise and market position -- primarily retail-based -- national, regional, or local. They also include good and predictable liquidity; stable funding -- mainly retail – as well as conservative reliance on short-term market funding.
A3-P-1 rated banks would also display low-to-moderate asset volatility, evidenced by the lack of large pockets of high credit risk concentrations that could be of a peculiar concern, as well as low appetite for riskier and potentially more volatile activities. In Moody’s opinion, such predictable fundamentals shelter these banks from more significant credit transition risk, therefore justifying P-1 ratings compatible with A3 long-term ratings.
Moody’s concluded by saying that in the future this analysis will underpin the assignment of the appropriate short-term ratings to banks whose long-term ratings would fall in the low single-A range.
Upgraded to Prime-1 from Prime-2 were the short-term ratings of the following banks (all with long-term ratings maintained at A3):
Greece: National Bank of Greece, EFG Eurobank Ergasias, and Alpha Bank.
Iceland: Bunadarbanki Islands, Landsbanki Islands.
Ireland: First Active PLC and EBS Building Society.
Italy: Banca Sella, Cassa di Risparmio di Bolzano-Suedtiroler Sparkassen, Cassa dei Risparmi di Forli, and Fineco Group.
Netherlands: Friesland Bank.
Portugal: Caixa Economica Montepio Geral.
Spain: Caja de Ahorro de La Rioja and Caja Cantabria. Another local savings bank, Caixa Manresa, is already rated A3/P-1.
United Kingdom: Chelsea Building Society, Cheshire Building Society, Derbyshire Building Society, Dunfermline Building Society, Leeds & Holbeck Building Society, and Skipton Building Society.
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