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20 Apr 2007
Moody's announces bank rating actions for Switzerland and Liechtenstein resulting from implementation of JDA and BFSR methodologies
New York, April 20, 2007 -- Moody's Investors Service today published the rating results for banks
in Switzerland and Liechtenstein as part of the application of its refined
joint default analysis (JDA) and updated bank financial strength rating
BFSRs evaluate the stand-alone or intrinsic financial strength
of banks without reference to external support factors. BFSRs are
the starting point of Moody's bank credit analysis, and are
an important determinant of Moody's bank deposit and debt ratings.
Moody's then uses its JDA methodology to incorporate the potential
for external support into a bank's local currency deposit rating.
The potential for external support can reduce the riskiness of a bank's
deposit and debt obligations; however, such support is often
uncertain. Moody's uses conservative support assumptions
and a limited number of support levels to ensure that sufficient weight
is given to a bank's intrinsic financial strength in its bank deposit
and debt ratings.
Moody's uses deposit ratings to determine bank debt ratings based
on its notching guidelines for bank securities. Ratings for foreign
currency obligations are determined after considering Moody's country
ceilings for foreign currency ratings.
The methodologies are being implemented country by country, with
results being announced on a weekly basis. Results for those banks
with a parent bank located in another country where the methodologies
have not yet been implemented will be concluded at the same time as the
The most significant debt rating upgrades based on systemic support were
for the two largest Swiss banks. UBS AG and Credit Suisse's
deposit ratings have been upgraded to Aaa (from Aa2) and Aa1 (from Aa3)
respectively due to banks' systemic importance in the Swiss banking system,
combined with a one notch upgrade in their BFSRs.
The deposit ratings of Raiffeisen Schweiz have been upgraded to Aa1 (from
Aa2). The Aaa and Aa1 ratings for the largest three deposit takers
in Switzerland reflect our assessment of the likely availability of systemic
support in the event of distress at these institutions, given their
importance to the Swiss economy and its payment system.
With regard to Credit Suisse Group, whose long term debt rating
has been raised to Aa2 (from Aa3) Moody's has established a one
notch difference between the holding company and its main banking subsidiary
Credit Suisse. In doing this we are recognising the structural
subordination that exists and is brought more firmly into focus by the
support imputed to deposit and debt holders at the bank level.
The long term rating and BFSR of Clariden Leu A.G.,
another banking subsidiary of Credit Suisse, have been raised to
Aa2 and B- respectively (from Aa3 and C+) reflecting the change
in rating of its parent and the implementation of Moody's BFSR methodology.
With regard to ratings of subsidiaries and issuing vehicles of UBS AG,
while guaranteed or backed issues have been raised in line with the ratings
of the parent, the Aa2 long term debt rating of its non-guaranteed
finance unit subsidiary, UBS Loan Finance LLC in the USA,
has been placed on review for possible upgrade.
This press release lists the names of issuers in Switzerland and Liechtenstein
whose ratings have been changed, affirmed, or put on review.
To view ratings changes and other documents explaining Moody's bank
rating methodologies, please go to www.moodys.com/JDABanks.
Below is a list of banks whose ratings have been upgraded:
BSI AG to A1 from A2
Clariden Leu A.G. to Aa2 from Aa3
Credit Suisse AG to Aa1 from Aa3
HSBC Private Bank (Suisse) SA to Aa2 from Aa3
Raiffeisen Schweiz to Aa1 from Aa2
UBS AG to Aaa from Aa2
Below is a list of banks whose ratings have been affirmed:
Bank Julius Baer & Co. AG
Bank Morgan Stanley AG
Banque SYZ & Co. S.A.
LGT Bank in Liechtenstein
SIS SegaInterSettle AG
SIS x-clear AG
St. Galler Kantonalbank
Valiant Bank AG
ABOUT MOODY'S BANK RATINGS
Bank Financial Strength Rating
Moody's Bank Financial Strength Ratings (BFSRs) represent Moody's opinion
of a bank's intrinsic safety and soundness and, as such, exclude
certain external credit risks and credit support elements that are addressed
by Moody's Bank Deposit Ratings. Bank Financial Strength Ratings
do not take into account the probability that the bank will receive such
external support, nor do they address risks arising from sovereign
actions that may interfere with a bank's ability to honor its domestic
or foreign currency obligations. Factors considered in the assignment
of Bank Financial Strength Ratings include bank-specific elements
such as financial fundamentals, franchise value, and business
and asset diversification. Although Bank Financial Strength Ratings
exclude the external factors specified above, they do take into
account other risk factors in the bank's operating environment,
including the strength and prospective performance of the economy,
as well as the structure and relative fragility of the financial system,
and the quality of banking regulation and supervision.
Global Local Currency Deposit Rating
A deposit rating, as an opinion of relative credit risk, incorporates
the Bank Financial Strength Rating as well as Moody's opinion of any external
support. Specifically, Moody's Bank Deposit Ratings are opinions
of a bank's ability to repay punctually its deposit obligations.
As such, Moody's Global Local Currency Bank Deposit Ratings are
intended to incorporate those aspects of credit risk relevant to the prospective
payment performance of rated banks with respect to local currency deposit
obligations, and includes: intrinsic financial strength and
both implicit and explicit external support elements. Moody's Bank
Deposit Ratings do not take into account the benefit of deposit insurance
schemes which make payments to depositors, but they do recognize
the potential support from schemes that may provide assistance to banks
Foreign Currency Deposit Rating
Moody's ratings on foreign currency bank obligations derive from the bank's
local currency rating for the same class of obligation. The implementation
of JDA for banks can lead to a high local currency ratings for certain
banks, which could also produce high foreign currency ratings.
Nevertheless, it should be reminded that foreign currency deposit
ratings are in all cases constrained by the country ceiling for foreign
currency bank deposits. This may result in the assignment of a
different, and typically lower, rating for the foreign currency
deposits relative to the bank's rating for local currency obligations.
Foreign Currency Debt Rating
Foreign currency debt ratings are derived from the bank's local currency
debt rating for the same class of obligation. In a similar way
to foreign currency deposit ratings, foreign currency debt obligations
may also be constrained by the country ceiling for foreign currency bonds
and notes, however, in some cases the ratings on foreign currency
debt obligations may be allowed to pierce the foreign currency ceiling.
A particular mix of rating factors are taken into consideration in order
to assess whether a foreign currency bond rating pierces the country ceiling.
They include the issuer's global local currency rating, the foreign
currency government bond rating, the country ceiling for bonds and
the debt's eligibility to pierce that ceiling.
National Scale Rating
National scale ratings are intended primarily for use by domestic investors
and are not comparable to Moody's globally applicable ratings; rather
they address relative credit risk within a given country. An Aaa
rating on Moody's National Scale indicates an issuer or issue with the
strongest creditworthiness and the lowest likelihood of credit loss relative
to other domestic issuers. National Scale Ratings, therefore,
rank domestic issuers relative to each other and not relative to absolute
default risks. National ratings isolate systemic risks; they
do not address loss expectation associated with systemic events that could
affect all issuers, even those that receive the highest ratings
on the National Scale.
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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