Ratings are assigned following June 2018 update to Moody's Banks rating methodology
NOTE: On June 08, 2018, the press release was corrected as follows: The headline was changed to “Moody's assigns Counterparty Risk Ratings to 18 Spanish banking groups.” Revised release follows.
Madrid, June 08, 2018 -- Moody's Investors Service has today assigned Counterparty Risk Ratings
to 18 Spanish banking groups: Banco Santander S.A.
(Spain) (Banco Santander), Santander Consumer Finance S.A.
(SCF), Banco Popular Espanol, S.A. (Banco Popular),
Banco Bilbao Vizcaya Argentaria S.A. (BBVA), CaixaBank
S.A., Banco Sabadell S.A., Bankia
S.A., Bankinter S.A., Kutxabank
S.A., Unicaja Banco (Unicaja), Ibercaja Banco
SA (Ibercaja), ABANCA Corporacion Bancaria, S.A.
(Abanca), Liberbank, Banca March S.A.,
Caja Rural de Navarra, CECABANK S.A., Banco
Cooperativo Espanol, S.A. (BCE), and Bankoa,
S.A.
Moody's Counterparty Risk Ratings (CRR) are opinions of the ability
of entities to honor the uncollateralized portion of non-debt counterparty
financial liabilities (CRR liabilities) and also reflect the expected
financial losses in the event such liabilities are not honored.
CRR liabilities typically relate to transactions with unrelated parties.
Examples of CRR liabilities include the uncollateralized portion of payables
arising from derivatives transactions and the uncollateralized portion
of liabilities under sale and repurchase agreements. CRRs are not
applicable to funding commitments or other obligations associated with
covered bonds, letters of credit, guarantees, servicer
and trustee obligations, and other similar obligations that arise
from a bank performing its essential operating functions.
A full list of the affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
In assigning CRRs to the banks subject to this rating action, Moody's
starts with the banks' adjusted Baseline Credit Assessment (BCA) and uses
the agency's existing advanced Loss-Given-Failure
(LGF) approach that takes into account the level of subordination to CRR
liabilities in the bank's balance sheet and assumes a nominal volume of
such liabilities. In addition, where applicable, Moody's
has incorporated the likelihood of government support for CRR liabilities.
As a result, of the CRRs assigned to the 18 banking groups,
the CRRs of two banks (Banco Sabadell and Bankia) are four notches higher
than their respective adjusted BCAs, the CRRs of six banks (BBVA,
CaixaBank, Bankinter, Unicaja, CECABANK and Banca March)
are three notches higher, the CRRs of four banks (Banco Santander,
SCF, Banco Popular and BCE) are two notches higher and the CRRs
of six banks (Kutxabank, Abanca, Ibercaja, Liberbank,
Caja Rural de Navarra and Bankoa) are one notch higher.
Although most if not all of the eight banking groups whose CRRs receive
four or three notches of uplift from their adjusted BCAs are likely to
have more than a nominal volume of CRR liabilities at failure, this
has no impact on the ratings because the significant level of subordination
below the CRR liabilities at each of the eight banking groups already
provides the maximum amount of uplift allowed under Moody's rating
methodology.
CRR's of Banco Santander, SCF and Banco Popular are constrained
by Spain's sovereign rating of Baa1. Under our methodology,
a bank's CRR will typically not exceed the sovereign rating by more than
two notches.
In all cases the CRRs assigned are equal to or higher than the rated bank
senior debt ratings, where applicable. This reflects Moody's
view that secured counterparties to banks typically benefit from greater
protections under insolvency laws and bank resolution regimes than do
senior unsecured creditors, and that this benefit is likely to extend
to the unsecured portion of such secured transactions in most bank resolution
regimes. Moody's believes that in many cases regulators will
use their discretion to allow a bank in resolution to continue to honor
its CRR liabilities or to transfer those liabilities to another party
who will honor them, in part because of the greater complexity of
bailing in obligations that fluctuate with market prices, and also
because the regulator will typically seek to preserve much of the bank's
operations as a going concern in order to maximize the value of the bank
in resolution, stabilize the bank quickly, and avoid contagion
within the banking system. CRR liabilities at these banking groups
therefore benefit from the subordination provided by more junior liabilities,
with the extent of the uplift of the CRR from the adjusted BCA depending
on the amount of subordination.
FACTORS THAT COULD LEAD TO AN UPGRADE
As the banks' CRRs are linked to the standalone BCA and the results of
Moody's LGF analysis, any upward change to the BCA and rating
uplift under the LGF analysis would likely also affect these ratings.
The banks' standalone BCAs could be upgraded as a consequence of a sustained
recovery in recurrent profitability levels, while maintaining current
improving trends of asset risk indicators, with an ongoing reduction
in the stock of problematic assets. The banks' BCAs could also
be upgraded on the back of stronger Tangible Common Equity (TCE) levels.
The banks' CRRs could also experience upward pressure from movements in
the loss-given-failure faced by these liabilities.
Changes in the banks' liability structure which would indicate a
lower loss severity for senior creditors could result in higher ratings
uplift, except for those eight banking groups whose CRR's
are positioned three notches above their adjusted BCA. The significant
level of subordination below the CRR liabilities at each of the eight
banking groups already provides the maximum amount of uplift allowed under
Moody's rating methodology.
Further, under Moody's methodology, a bank's CRR will
typically not exceed the sovereign rating by more than two notches.
Spanish banks' maximum achievable CRR is therefore A2/Prime-1.
FACTORS THAT COULD LEAD TO A DOWNGRADE
Likewise, as the banks' CRRs are linked to the standalone BCA and
the results of Moody's LGF analysis, any deterioration of
the BCA and lower rating uplift under the LGF analysis would likely also
affect these ratings.
Downward pressure on the banks' BCAs could develop as a result of:
(1) the reversal in current asset risk trends with an increase in the
stock of nonperforming assets; (2) a weakening of banks' internal
capital-generation and risk-absorption capacity as a result
of subdued profitability levels; and/or (3) a deterioration in the
banks' liquidity position.
The banks' CRRs could also experience downward pressure from movements
in the loss-given-failure faced by these liabilities.
Sustained lower volumes of subordinated, senior debt instruments
or junior deposits could result in fewer notches of rating uplift under
the Advanced LGF analysis.
Furthermore, where applicable, Moody's re-assessment
of the likelihood of systemic support from the Government of Spain could
reduce rating uplift and lead to downgrades of CRR.
LIST OF AFFECTED RATINGS
Issuer: Banco Santander S.A. (Spain)
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned A2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned P-1
Issuer: Banco Santander, S.A., London
Branch
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned A2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned P-1
Issuer: Banco Santander, S.A., New York
Branch
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned A2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned P-1
Issuer: Santander Consumer Finance S.A.
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned A2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned P-1
Issuer: Banco Popular Espanol, S.A.
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned A2
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-1
Issuer: Banco Bilbao Vizcaya Argentaria, S.A.
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned A2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned P-1
Issuer: Banco Bilbao Vizcaya Argentaria, SA London Br
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned A2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned P-1
Issuer: Banco Bilbao Vizcaya Argentaria, SA Paris Br
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned A2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned P-1
Issuer: Banco Bilbao Vizcaya Argentaria,SA, New York
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned A2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned P-1
Issuer: CaixaBank, S.A.
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Baa1
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Banco Sabadell, S.A.
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned Baa1
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned P-2
Issuer: Banco Sabadell S.A., London Branch
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned Baa1
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned P-2
Issuer: Bankia, S.A.
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Baa1
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Bankinter, S.A.
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned A3
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Kutxabank, S.A.
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Baa1
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Unicaja Banco
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Baa2
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Ibercaja Banco SA
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Ba2
....Short-term (Local Currency) Counterparty
Risk Rating, assigned NP
Issuer: ABANCA Corporacion Bancaria, S.A.
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Ba1
....Short-term (Local Currency) Counterparty
Risk Rating, assigned NP
Issuer: Liberbank
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Ba3
....Short-term (Local Currency) Counterparty
Risk Rating, assigned NP
Issuer: Banca March S.A.
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned A2
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-1
Issuer: Caja Rural de Navarra
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned A3
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: CECABANK S.A.
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Baa1
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Banco Cooperativo Espanol, S.A.
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Baa1
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Bankoa, S.A
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned A3
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
June 2018. Please see the Rating Methodologies 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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Items color coded in purple in this Press Release relate to unsolicited
ratings for a rated entity which is non-participating.
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 rating analyst and the Moody's legal entity that has issued
the ratings.
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.
Maria Cabanyes
Senior Vice President
Financial Institutions Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454