Ratings are assigned following 6 June 2018 update to Moody's Banks rating methodology
London, 27 June 2018 -- Moody's Investors Service today assigned Counterparty Risk Ratings
(CRRs) to entities within the following 22 rated banking groups and building
societies, which operate in the UK and the Crown Dependencies:
Bank of Ireland (UK) Plc, Barclays Bank UK PLC, Close Brothers
Ltd., Clydesdale Bank plc, The Co-operative
Bank Plc, Coventry Building Society, ICBC Standard Bank Plc,
ICICI Bank UK Plc., Investec Bank plc, Itau BBA International
plc, Leeds Building Society, Lloyds Banking Group plc,
Nationwide Building Society, Nedbank Private Wealth Limited,
Nottingham Building Society, Principality Building Society,
The Royal Bank of Scotland Group plc, Santander UK plc, Skipton
Building Society, TSB Bank plc, Virgin Money plc, and
Yorkshire Building Society.
For the CRRs of the entities within the HSBC Holdings plc group and within
the Barclays Plc group other than Barclays Bank UK plc, please refer
to the press release entitled "Moody's assigns Counterparty Risk
Ratings to rated bank subsidiaries and branches of HSBC Holdings plc,
Deutsche Bank AG, BNP Paribas, Societe Generale, Credit
Suisse Group AG, UBS Group AG, and to Barclays Bank PLC and
its rated branches", published on 13 June 2018 available at
https://www.moodys.com/research/--PR_384987
Moody's Counterparty Risk Ratings (CRRs) are opinions of the ability
of entities to honour 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 honoured.
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.
RATINGS RATIONALE
In assigning CRRs to the banks and building societies operating in the
UK subject to this rating action, Moody's starts with the
banks' adjusted Baseline Credit Assessments (BCAs) 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 banks' balance
sheets, and assumes a nominal volume of such liabilities.
For banks operating in Jersey and in the Isle of Man, because Moody's
considers these countries to be jurisdictions with non-operational
resolution regimes, Moody's starts with the banks' adjusted
Baseline Credit Assessment (BCA), and uses the agency's existing
basic LGF approach that provides one notch of uplift for the CRR from
the adjusted BCAs. This reflects the rating agency's view
that CRR liabilities are not likely to default at the same time as the
bank fails and are more likely to be preserved in order to minimize banking
system contagion, minimize losses and avoid disruption of critical
functions.
In four cases indicated below the CRRs benefit from further uplift from
government support.
-- UPLIFT FROM OUR LOSS GIVEN FAILURE ANALYSIS
- For 13 banking groups and building societies, Moody's
advanced LGF approach provides three notches of uplift to the CRRs above
their respective adjusted BCAs: Barclays Bank UK PLC, Close
Brothers Ltd., Clydesdale Bank plc, Coventry Building
Society, ICICI Bank UK Plc., Investec Bank plc,
Itau BBA International plc, Leeds Building Society, Nationwide
Building Society, Principality Building Society, the subsidiaries
and branches of The Royal Bank of Scotland Group plc, Santander
UK plc, and Yorkshire Building Society.
- For the subsidiaries and branches of the Lloyds Banking Group
plc, Moody's advanced LGF approach provides three notches
of uplift to the CRRs, above the adjusted BCAs, for all entities
but Jersey-based Lloyds Bank International Limited (LBIL).
For LBIL, in assigning the CRR the rating agency uses its basic
LGF approach because Moody's considers Jersey a jurisdiction with
a non-operational resolution regime; Moody's basic LGF
analysis provides one notch of uplift for the CRR from LBIL's adjusted
BCAs.
Although many of these banking groups and building societies 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 banking groups and banking societies
already provides the maximum amount of uplift under Moody's rating
methodology.
- For one bank and one building society, Moody's advanced
LGF approach provides two notches of uplift to the CRRs, above their
respective adjusted BCAs: Bank of Ireland (UK) Plc, Skipton
Building Society.
- For four banks and building societies, Moody's advanced
LGF approach provides one notch of uplift to the CRRs, above their
respective adjusted BCAs: The Co-operative Bank Plc,
Nottingham Building Society, TSB Bank plc, and Virgin Money
plc.
- For ICBC Standard Bank, due to the low volume of subordination,
and the rating agency's assumption of a higher expected loss rate
in a resolution scenario, Moody's advanced LGF approach results
in a CRR one notch below the bank's adjusted BCA.
- For Nedbank Private Wealth Limited (NPWL) Moody's applies
its basic LGF analysis because the bank operates in the Isle of Man,
a jurisdiction that the rating agency considers a non-operational
resolution regime; Moody's basic LGF analysis provides one
notch of uplift from NPWL's adjusted BCA.
In all cases, the CRRs assigned are equal to or higher than the
rated senior debt and deposit 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 honour its CRR liabilities or to transfer those liabilities
to another party who will honour 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 banks subject to operational resolution regimes 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.
-- UPLIFT FROM GOVERNMENT SUPPORT
- For three banking groups and one building society, Moody's
considers the likelihood of government support for CRR liabilities to
be moderate, resulting in an additional one notch of uplift,
reflecting their systemic importance to the UK and global financial system:
Barclays Bank UK Plc, Nationwide Building Society, the subsidiaries
and branches of The Royal Bank of Scotland Group plc, and Santander
UK plc. In these cases, the CRRs are positioned four notches
above their respective adjusted BCAs.
- Within the Lloyds Banking Group plc, Moody's considers
the likelihood of government support for CRR liabilities to be moderate
for the ring-fenced entities Lloyds Bank PLC, HBOS plc,
and Bank of Scotland plc; moderate probability of support does not
however result in any uplift, due to their proximity to the UK's
sovereign debt rating. For the non-ring-fenced entities
Lloyds Bank Corporate Markets plc (LBCM) and Lloyds Bank International
Limited (LBIL), the rating agency believes the likelihood of government
support to be low, resulting in no uplift, due to their small
size and low systemic importance.
- For the remaining 17 banking groups and building societies,
due to their limited systemic importance, Moody's believes
there is a low probability of government support for CRR liabilities,
which does not result in any further uplift: Bank of Ireland UK
Plc, Close Brothers Ltd., Clydesdale Bank plc,
The Co-operative Bank Plc, Coventry Building Society,
ICBC Standard Bank Plc, ICICI Bank UK Plc., Investec
Bank plc, Itau BBA International plc, Leeds Building Society,
Nedbank Private Wealth Limited, Nottingham Building Society,
Principality Building Society, Skipton Building Society, TSB
Bank plc, Virgin Money plc, and Yorkshire Building Society.
OUTLOOK
CRRs do not carry outlooks.
For Clydesdale Bank plc, the long-term CRR is on review with
direction uncertain, while the short-term CRR, which
is currently Prime-1 and at the top of the short-term rating
scale, is on review for downgrade; for Virgin Money plc,
the long-term and short-term CRRs are on review for upgrade.
The reviews reflect the banks' potential combination. For
further details on the potential impacts of the merger, which remains
subject to shareholder votes at both banks and regulatory approval,
please refer to our Press Release entitled "Moody's places
the ratings of CYBG and Virgin Money on review" published on 21
June 2018, available at https://www.moodys.com/research/--PR_385439.
FACTORS THAT COULD LEAD TO AN UPGRADE/DOWNGRADE
The CRRs of the banks and building societies included in this rating action
could be upgraded following an upgrade of their respective adjusted BCAs;
for banks whose CRRs benefit from less than three notches of uplift from
Moody's advanced LGF approach, a higher volume of bail-in-able
debt and junior deposits could also lead to an upgrade of the CRRs.
Conversely, the CRRs of these banks and building societies could
be downgraded following a downgrade of their respective adjusted BCAs,
or by a reduction in their stock of bail-in-able debt and
junior deposits.
LIST OF AFFECTED RATINGS
Issuer: Abbey National Treasury Services plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa2
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Abbey National Treasury Services plc (Paris)
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa2
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Abbey National Treasury Services PLC (US Br.)
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa2
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Bank of Ireland (UK) Plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-2
Issuer: Bank of Scotland plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Barclays Bank UK PLC
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa2
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Close Brothers Ltd.
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa2
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Clydesdale Bank plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A2, placed on review
direction uncertain
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1, placed
on review for downgrade
Issuer: Coventry Building Society
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: HBOS plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: ICBC Standard Bank Plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Baa3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-3
Issuer: ICICI Bank UK Plc.
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Baa1
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-2
Issuer: Investec Bank plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A2
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Itau BBA International plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A2
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Leeds Building Society
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A1
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Lloyds Bank Corporate Markets plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A1
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Lloyds Bank International Limited
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-2
Issuer: Lloyds Bank Plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: National Westminster Bank PLC
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Nationwide Building Society
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa2
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: NatWest Markets N.V.
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-2
Issuer: NatWest Markets N.V., London Branch
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-2
Issuer: NatWest Markets Plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-2
Issuer: Nedbank Private Wealth Limited
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Baa1
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-2
Issuer: Nottingham Building Society
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-2
Issuer: Principality Building Society
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A2
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Santander UK plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa2
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Skipton Building Society
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A2
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: The Co-operative Bank Plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Caa1
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned NP
Issuer: The Royal Bank of Scotland plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: TSB Bank plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Baa1
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-2
Issuer: Ulster Bank Limited
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Aa3
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
Issuer: Virgin Money plc
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned Baa1; placed on review
for upgrade
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-2; placed on
review for upgrade
Issuer: Yorkshire Building Society
..Assignments:
....Long-term Counterparty Risk Rating
(Local and Foreign Currency), assigned A1
....Short-term Counterparty Risk Rating
(Local and Foreign Currency), assigned P-1
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.
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.
The person who approved Abbey National Treasury Services plc, Abbey
National Treasury Services plc (Paris), Abbey National Treasury
Services PLC (US Br.), Bank of Ireland (UK) Plc, Bank
of Scotland plc, Close Brothers Ltd., Clydesdale Bank
plc, Co-operative Bank Plc, Coventry Building Society,
HBOS plc, ICBC Standard Bank Plc, ICICI Bank UK Plc.,
Investec Bank plc, Itau BBA International plc, Leeds Building
Society, Lloyds Bank Corporate Markets plc, Lloyds Bank International
Limited, Lloyds Bank Plc, National Westminster Bank PLC,
Nationwide Building Society, NatWest Markest N.V.,
London Branch, NatWest Markets N.V., NatWest
Markets Plc, Nedbank Private Wealth Limited, Nottingham Building
Society, Principality Building Society, Santander UK plc,
Skipton Building Society, The Royal Bank of Scotland plc,
TSB Bank plc, Ulster Bank Limited, Virgin Money plc and Yorkshire
Building Society credit ratings is Nicholas Hill, MD - Banking,
Financial Institutions Group, JOURNALISTS: 44 20 7772 5456,
Client Service: 44 20 7772 5454. The person who approved
Barclays Bank UK PLC credit ratings is Ana Arsov, MD - Financial
Institutions, Financial Institutions Group, JOURNALISTS:
1 212 553 0376, Client Service: 1 212 553 1653.
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.
Edoardo Calandro
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Nicholas Hill
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454
