Singapore, June 03, 2013 -- Moody's Investors Service announced today that it has placed on
review for downgrade the bank subordinated and junior subordinated debt
(subdebt) ratings that have benefited from an uplift linked to Moody's
prior assessment of systemic support in India.
The affected banks are:
- Axis Bank Limited (deposits Baa2 STA(m), BFSR D+/BCA
baa3 STA)
- Bank of Baroda (deposits Baa2 NEG(m), BFSR D+/BCA
ba1 NEG)
- Bank of India (deposits Baa3 STA(m), BFSR D/BCA ba2 NEG)
- Canara Bank (deposits Baa2 NEG(m), BFSR D+/BCA ba1
NEG)
- HDFC Bank Limited (deposits Baa2 STA(m), BFSR D+/BCA
baa3 STA)
- ICICI Bank Limited (deposits Baa2 STA(m), BFSR D+/BCA
baa3 STA)
- IDBI Bank Ltd (deposits Baa3 STA(m), BFSR D-/BCA
ba3 STA)
- Indian Overseas Bank (deposits Baa3 NEG(m), BFSR D-/BCA
ba3 NEG)
- State Bank of India (deposits Baa2 STA(m), BFSR D+/BCA
ba1 STA)
- Syndicate Bank (deposits Baa3 STA(m), BFSR D/BCA ba2 NEG)
- Union Bank of India (deposits Baa3 STA(m), BFSR D/BCA ba2
STA)
The list of the specific individual program and debt ratings being placed
under review is provided further below.
Moody's highlights that the reviews of the banks' subdebt
ratings are not in any way related to any deterioration in the affected
banks' fundamental credit quality.
The review takes place in the context of a methodology update that has
changed the way Moody's looks at the probability of support,
which has led to several subdebt ratings in multiple banking systems being
reviewed simultaneously.
The revised methodology that underpins today's announcement was
formally announced in a separate document on 31 May following a public
comment period launched in early April 2013. Both documents can
be found on www.moodys.com, and their titles are Global
Banks Rating Methodology (May 31, 2013) and Moody's Proposed Approach
for Rating Certain Bank Contingent Capital Securities and Update to Approach
for Rating Bank Subordinated Debt (April 10, 2013).
Moody's expects to conclude its review within the next three months.
RATINGS RATIONALE
The methodology update and the related rating actions announced today
are driven by the conclusion that government policy to deal with ailing
banks has evolved globally -- albeit at different speeds and degrees
across systems -- in a way that makes support for bank subdebt
less probable than before.
"Government policy has evolved towards the adoption of "burden
sharing" principles, and gradually away from the automatic
bail out of all creditors over the last few years" says Stephen
Long, Managing Director for Asia Pacific Financial Institutions
at Moody's.
Moody's also highlights that the many examples of losses being imposed
on subdebt holders in the context of bank resolutions in other regions
have lowered the probability that Asian authorities would feel obliged
to support subdebt due to concerns about the risk of contagion.
There would be little stigma attached to involving subdebt in burden sharing
given these prior examples and given that the global regulatory consensus
increasingly sees this as best practice.
"The willingness of governments and regulators to apply burden sharing
principles and their ability to do so without causing contagion have been
demonstrated in several recent cases where losses were effectively imposed
on creditors along the entire credit hierarchy in order to recapitalize
banks" Long adds.
With respect to Asia and more particularly India, Moody's
says that regulators have been reluctant to explicitly endorse the burden
sharing principles and adopt special resolution powers.
Nevertheless, Moody's says it is mindful that such a stance
has emerged in the context of an absence of banking crises or bail-outs,
and the politics of bank resolution could change materially in times of
stress, and the region's regulators may then be more inclined
to borrow tools deployed elsewhere.
Moody's explained that although the review for downgrade has nothing
to do with any observable deterioration in the credit quality of the banks,
it needs to assess whether the government's likely behavior in times
of stress has changed compared to previous assumptions.
Moody's preliminary conclusion points to reasonable doubt over whether
the status quo would survive test cases where governments provide significant
financial support to banks, particularly in a systemic crisis that
puts stress on the government's own balance sheet. The rating
agency has therefore placed the banks' subdebt ratings under review
for downgrade.
A Special Comment providing an extensive assessment of the factors that
have led to the review and which will guide Moody's during the review
period will be published separately today. The publication will
be entitled "Moody's Reconsideration of Support for the Subordinated
Debt of Asia-Pacific Banks".
The Indian banks whose subdebt ratings currently benefit from a support
uplift and which have been placed under review for downgrade are:
Axis Bank Limited, DIFC Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
Axis Bank Limited, Hong Kong Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
Axis Bank Limited, Singapore Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
-- Long-term foreign currency junior subordinated
debt rating of Ba1(hyb)
Bank of Baroda, London Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency subordinated debt rating
of Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
Bank of India:
-- Long-term foreign currency subordinated debt program
rating of (P)Ba1
Bank of India, London Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Ba1
-- Long-term foreign currency subordinated debt rating
of Ba1
Bank of India, Jersey Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Ba1
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba2
Canara Bank:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
Canara Bank, London Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
-- Long-term foreign currency junior subordinated
debt rating of Ba1(hyb)
HDFC Bank Limited:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
HDFC Bank Limited, Bahrain Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
HDFC Bank Limited, Hong Kong Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
ICICI Bank Limited:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
ICICI Bank Limited, New York Branch:
-- Long-term local currency subordinated debt program
rating of (P)Baa3
-- Long-term local currency junior subordinated debt
program rating of (P)Ba1
ICICI Bank Limited, Bahrain Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
-- Long-term foreign currency junior subordinated
debt rating of Ba1(hyb)
ICICI Bank Limited, Dubai Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
ICICI Bank Limited, Hong Kong Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
ICICI Bank Limited, Singapore Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
IDBI Bank Ltd:
-- Long-term foreign currency subordinated debt program
rating of (P)Ba1
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba2
IDBI Bank Ltd, DIFC Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Ba1
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba2
Indian Overseas Bank:
-- Long-term foreign currency subordinated debt program
rating of (P)Ba1
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba2
Indian Overseas Bank, Hong Kong Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Ba1
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba2
State Bank of India:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
State Bank of India, Hong Kong Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
State Bank of India, London Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
State Bank of India, Nassau Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Baa3
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba1
Syndicate Bank:
-- Long-term foreign currency subordinated debt program
rating of (P)Ba1
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba2
Syndicate Bank, London Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Ba1
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba2
Union Bank of India:
-- Long-term foreign currency subordinated debt program
rating of (P)Ba1
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba2
Union Bank of India, Hong Kong Branch:
-- Long-term foreign currency subordinated debt program
rating of (P)Ba1
-- Long-term foreign currency junior subordinated
debt program rating of (P)Ba2
The principal methodology used in these ratings was Moody's Global
Banks Rating Methodology published on 31 May 2013. Please see the
Credit Policy page on www.moodys.com for a copy of this
methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Vineet Gupta
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Moody's announces reviews for downgrade of 11 banks' subdebt ratings in India
