London, 15 February 2012 -- Moody's Investors service has today announced rating actions affecting
114 financial institutions (counted by group) in 16 European countries.
The actions reflect, to differing degrees, the combined pressures
from (i) the adverse and prolonged impact of the euro area crisis,
which makes the operating environment very difficult for European banks;
(ii) the deteriorating creditworthiness of euro area sovereigns,
which led to the adjustment of the ratings for nine European sovereigns
on 13 February 2012 http://www.moodys.com/EUSovereign;
and (iii) longer-term, the substantial challenges faced by
banks and securities firms with significant capital market activities.
While there are mitigating factors such as the currently supportive stance
of many governments towards their banking systems and accommodative monetary
policies, these are overshadowed by the aforementioned pressures,
in Moody's opinion. Moody's expects that once the reviews
announced today are resolved, its EU bank ratings will fully reflect
the effects of currently foreseen adverse credit drivers.
The reviews announced today follow an earlier announcement from 19 January
2012 according to which the ratings of a number of European banks were
expected to be placed on review for downgrade during first-quarter
2012; see release titled "Moody's: Global bank ratings
likely to decline in 2012" http://www.moodys.com/research/Moodys-Global-bank-ratings-likely-to-decline-in-2012--PR_235663
RATINGS RATIONALE
Moody's actions can be summarised as follows:
IMPACT OF THE EURO AREA CRISIS ON EUROPEAN BANKS
(i) For 99 financial institutions, the standalone credit assessments
have been placed on review for downgrade.
(ii) For 109 institutions, the long-term debt and deposit
ratings have been placed on review for downgrade.
(iii) For 66 institutions, the short-term ratings have been
placed on review for downgrade.
IMPACT OF REPOSITIONING OF EUROPEAN SOVEREIGN RATINGS ON GOVERNMENT-GUARANTEED
BANK DEBT AND GOVERNMENT-RELATED ISSUERS
(iv) Government-guaranteed debt ratings have been downgraded for
those banks in Portugal, Slovenia and Spain whose senior (unguaranteed)
debt ratings are now at or below their respective sovereign ratings.
(v) Government-guaranteed debt ratings have been placed on review
for downgrade for those banks in Portugal and Spain whose senior (unguaranteed)
debt ratings are currently higher than the government debt ratings.
A few ratings for government-guaranteed debt of such banks in Spain
were downgraded and subsequently placed on review.
(vi) The outlook on any bank debt guaranteed by France, Austria
or the UK has been changed to negative from stable.
(vii) The ratings of government-related financial institutions
in France, Italy, Slovenia and Spain, whose ratings
are based on the sovereign ratings, have been downgraded in the
case of Italian, Slovenian or Spanish institutions; and their
outlook has been changed to negative in the case of French institutions.
AFFECTED EUROPEAN FINANCIAL INSTITUTIONS BY COUNTRY
The financial institutions affected by this announcement are headquartered
in the following countries (counted by group and listed by parent domicile):
Austria (8), Belgium (1), Denmark (8), Finland (1),
France (10), Germany (7), Italy (24), Luxembourg (1),
Netherlands (6), Norway (1), Portugal (6), Slovenia
(4), Spain (21), Sweden (5),Switzerland (2), UK
(9).
LIST OF AFFECTED CREDIT RATINGS
Please click on this link to access the List of Affected Credit Ratings.
This list is an integral part of this Press Release and identifies each
affected issuer: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_139856.
The list also shows all European banks whose ratings had been placed on
review for downgrade previously (for reasons set out in the press releases
announcing those reviews) and which are also affected by one or more of
the drivers discussed here. Those previously-initiated reviews
will be concluded in coordination with the rating reviews announced today.
RATINGS RATIONALE -- STANDALONE CREDIT ASSESSMENTS
Moody's decision to place on review for downgrade the standalone
credit assessments of 99 European banks (and consequently their long-term
debt and deposit ratings, and in some cases their short-term
and subordinated ratings) reflects the aforementioned key drivers.
Moody's views the banks whose standalone credit assessments have
been placed on review for downgrade as vulnerable to one or more of these
pressures. The main drivers of today's announcement are described
in more detail in Moody's Comment "Why Global Bank Ratings
Are Likely To Decline In 2012" issued on 19 January 2012.
The key drivers are:
(1) VERY DIFFICULT OPERATING ENVIRONMENT IN EUROPE
Moody's will assess the effects on European bank credit profiles
from the difficult prevailing operating conditions in Europe. The
current environment is characterised by disrupted markets and a deteriorating,
uncertain economic outlook. In many countries, weakening
sovereign creditworthiness is exacerbating these negative characteristics.
Moody's has identified for review those banks that are susceptible
to the current conditions, given reliance on wholesale funding,
assets that are vulnerable to impairment and business franchises that
are vulnerable to a loss of customer and investor confidence. The
rating reviews will consider how the prevailing operating conditions affect
each bank, depending on its geographic presence, business
model, idiosyncratic factors and current rating levels. Further
detail is provided in a report titled "Euro Area Debt Crisis Weakens
Bank Credit Profiles", published 19 Jan 2012.
(2) WEAKENING SOVEREIGN CREDITWORTHINESS
The sovereign rating actions announced on 13 February 2012 have direct
implications for the ratings of a number of banks in Italy, Spain
and Portugal. They are vulnerable to weakened sovereign creditworthiness
on the broader operating environment, while some of them also have
sizeable sovereign exposures. Weaker sovereign credit profiles
may lead to downgrades of bank standalone credit assessments, in
line with Moody's approach to limiting standalone ratings that are
above the relevant sovereign. The linkage between sovereign and
bank creditworthiness is explained further in Moody's report titled
"How Sovereign Credit Quality May Affect Other Ratings",
published 13 Feb 2012.
(3) CHALLENGES FROM CAPITAL MARKETS ACTIVITIES
Moody's will also assess the challenges confronting financial institutions
that have significant capital markets operations. These difficulties
include inherent vulnerabilities such as confidence-sensitivity,
a high degree of interconnectedness and opacity of risk. Rapidly-changing
capital markets positions expose these firms to unexpected losses that
can overwhelm the resources of even the largest, most diversified
financial groups. In addition, firms with large capital markets
operations are confronting evolving adverse trends, such as more
fragile funding conditions, wider credit spreads, and increased
regulatory burdens. Combined, these issues have in Moody's
view diminished the longer-term profitability and revenue prospects
of these firms.
FOCUS OF REVIEWS OF STANDALONE CREDIT ASSESSMENTS
During the review period, Moody's will assess what steps,
if any, the relevant issuer can take to reduce its susceptibility
to the current environment and its ability to adapt its business model
to mitigate longer-term pressures. The review will also
focus on the extent to which each bank's standalone credit strength
is likely to be affected by the same factors that caused the sovereign
actions. Furthermore, each review will consider how far the
risks identified are mitigated by positive factors, such as the
highly accommodative stance of the European Central Bank (ECB) and other
central banks in Europe and by regulatory efforts in Europe and elsewhere
to improve the soundness of banks.
RATINGS RATIONALE -- LONG- AND SHORT-TERM
DEBT & DEPOSIT RATINGS
Changes in a bank's standalone credit assessment will in most cases
affect its long-term debt and deposit ratings. In addition,
the weakening sovereign creditworthiness reflected in Moody's repositioning
of sovereign ratings may affect not only banks' standalone credit
profiles, but also the ability and/or willingness of governments
to support banks if required. Moody's assumptions about government
(or systemic) support lead to the debt and deposit ratings of many banks
being positioned above their standalone credit strength. This support-driven
uplift may decline for some banks affected by today's actions.
While Moody's recognises the clear intent of governments around
the world to reduce support for creditors, the policy framework
in many countries remains supportive for now, not least because
of the painful economic repercussions of large, disorderly bank
failures and the difficulty of resolving complex, interconnected
institutions.
POTENTIAL OUTCOME OF REVIEWS
The following guidance is indicative only. The final rating impact
for each bank will be determined during the review.
Standalone credit assessments: For most banks whose standalone credit
assessments have been placed on review for downgrade today, Moody's
expects the reviews to result in downgrades of their standalone credit
assessments by one to three notches.
Long-term debt and deposit ratings: The ratings list http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_139856
indicates, by up to how many notches an issuer's long-term
debt and deposit ratings may decline. The long-term debt
and deposit ratings for 18 institutions that currently are rated investment
grade (Baa3 and higher) may see their long-term debt and deposit
ratings downgraded to sub-investment grade ratings (Ba1 and lower)
as a result of the reviews.
Short-term ratings: 30 issuers with currently Prime-1
short-term ratings may see these ratings downgraded to Prime-2.
Furthermore, 17 issuers with currently Prime ratings (Prime-1
through Prime-3) may see these ratings downgraded to Not Prime.
REVIEWS OF SUBORDINATED DEBT AND HYBRIDS
For all banks whose standalone credit assessments have been placed on
review, Moody's has also extended the review to the ratings
of all subordinated, junior subordinated and hybrid instruments.
Moody's will incorporate into the rating reviews announced today
the previously-initiated reviews for downgrade of subordinated,
junior subordinated and Tier-3 instruments ratings of European
banks. For more detail, see press release titled "Announcement:
Moody's reviews European banks' subordinated, junior and Tier 3
debt for downgrade", published 29 November 2011 http://www.moodys.com/research/Moodys-reviews-European-banks-subordinated-junior-and-Tier-3-debt--PR_231957.
WHAT COULD CHANGE RATINGS UP
Moody's believes there is little likelihood of any upward rating
pressure for any of the banks covered by today's announcement,
unless: (i) the European operating environment improves materially;
(ii) a decline in riskier assets meaningfully reduces a bank's exposure
to the above-described adverse drivers; (iii) the banks'
use of wholesale funding declines significantly; and (iv) the extent
of any capital market activities falls significantly.
WHAT COULD CHANGE RATINGS DOWN
For all banks whose ratings are included in the reviews announced today,
the most important rating drivers are: (i) pressures and uncertainty
caused by the very difficult operating environment; (ii) pressure
on profitability; (iii) asset-side vulnerabilities of banks;
(iv) challenges caused by restricted and more expensive wholesale funding
access; and (v) the risks inherent in any capital market activities.
RATING IMPLICATIONS FOR SUBSIDIARIES WILL BE ASSESSED SEPARATELY
Moody's will separately address the subsidiaries of the western
European banks included in today's announcement that might be affected
by a weakening of the parent's credit profile.
RESEARCH REFERENCES
For further detail please refer to
- Press Release: Moody's: Global bank ratings
likely to decline in 2012, 19 Jan 2012
- Special Comment: Euro Area Debt Crisis Weakens Bank Credit
Profiles, 19 Jan 2012
- Special Comment: European Banks: How Moody's
Analytic Approach Reflects Evolving Challenges, 19 Jan 2012
- Special Comment: Why Global Bank Ratings Are Likely to
Decline in 2012, 19 Jan 2012
- Special Comment "How Sovereign Credit Quality May Affect
Other Ratings", 13 Feb 2012.
- http://www.moodys.com/EUSovereign
The methodologies used in these ratings were Bank Financial Strength Ratings:
Global Methodology published in February 2007, Incorporation of
Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology published in March 2007, Moody's Guidelines for Rating
Bank Hybrid Securities and Subordinated Debt published in November 2009
and Government-Related Issuers: Methodology published in
July, 2010.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
REGULATORY DISCLOSURES
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_139856
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
Endorsement, Unsolicited ratings, EU participation in unsolicited
ratings, RAS/IAS Disclosure, Person approving the credit rating.
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.
Some ratings were initiated by Moody's and were not requested by the rated
entities. Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_139856
for the List of Affected Credit Ratings for the specific designation of
unsolicited ratings.
Some rated entities or their agents participated in the rating process.
The rated entities or their agents provided Moody's access to the
books, records and other relevant internal documents of these rated
entities. Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_139856
for the List of Affected Credit Ratings for the specific designation of
participating issuers in unsolicited ratings.
The ratings have been disclosed to the rated entities or their designated agents and issued with no amendment resulting from that disclosure.
Information sources used to prepare the ratings are the following :
parties involved in the ratings, parties not 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 the ratings 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
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Some rated entities have received a Rating Assessment Service within the
last two years preceding the Credit Rating Action. Please click
on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_139856
for the List of Affected Credit Ratings for the specific issuers who received
RAS.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entities or their 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.
The below contact information is provided for information purposes only.
Please see the issuer page on www.moodys.com for Moody's
regulatory disclosure of the name of the lead analyst and the office that
has issued the credit rating.
The relevant Releasing Office for each rating is identified under the
Debt/Tranche List section on the Ratings tab of each issuer/entity page
on moodys.com.
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
Johannes Wassenberg
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
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 Reviews Ratings for European Banks
