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Rating Action:

Moody's assigns Counterparty Risk Ratings to Singapore Banks and their respective branches

19 Jun 2018

Singapore, June 19, 2018 -- Moody's Investors Service has today assigned Counterparty Risk Ratings (CRRs) to five rated Singapore banks and their branches, as applicable.

The five Singapore banks comprise of: 1) DBS Bank Ltd. (DBS, LT Bank Deposits (Foreign), Aa1 stable), 2) Oversea-Chinese Banking Corp Ltd (OCBC, LT Bank Deposits (Foreign), Aa1 stable), 3) United Overseas Bank Limited (UOB, LT Bank Deposits (Foreign), Aa1 stable), 4) Standard Chartered Bank (Singapore) Limited (SCBSL; LT Bank Deposits (Foreign), Aa3 on review for downgrade), 5) Bank of Singapore Limited (BOS, LT Bank Deposits (Foreign), Aa1 stable).

At the same time, Moody's placed the CRRs of SCBSL on review for downgrade, because all other ratings and assessments of this bank are on review for downgrade since 22 February 2018. SCBSL is in the process of merging with the Singapore Branch of Standard Chartered Bank, and Moody's considers that the post-merger SCBSL will have a higher risk profile, compared to the pre-merger bank.

Moody's Counterparty Risk Ratings 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. For more information on CRRs, please see "Financial Institutions: FAQ: Counterparty Risk Ratings approach" published on 6 June 2018 on www.moodys.com.

RATINGS RATIONALE

The CRRs assigned to Singapore banks and their respective branches are in line with the Counterparty Risk Assessments (CR Assessments) already assigned.

Because Moody's considers Singapore not to have an operational resolution regime, in assigning CRRs to the Singapore banks subject to this rating action, the rating agency applies its basic Loss Given Failure (LGF) approach. Moody's basic LGF analysis positions CRRs in line with the banks' CRA, with the latter positioned one notch above the banks' adjusted baseline credit assessments (BCAs).

Furthermore, the CRRs for all five banks and their respective branches incorporate two notches of uplift from government support, also in line with that applied to the banks' CRAs, given Moody's expectation of a very high probability of government support. This reflects the banks' systemic importance to Singapore.

OUTLOOK

CRRs do not carry outlooks.

FACTORS THAT COULD LEAD TO AN UPGRADE/DOWNGRADE

What Could Change the Rating Up/Down - DBS Bank Ltd.

DBS' ratings are among the highest assigned to any financial institution globally, and upward pressure on the ratings is unlikely. However, improvement in the macroeconomic conditions in Singapore or the region, as well as in the bank's financial metrics, would be credit positive for the bank's BCA.

DBS' ratings could be downgraded if the bank's BCA is lowered. All other rating factors being constant, the BCA of DBS would come under downward pressure if the bank's (1) new NPL formation remains elevated, pointing toward a material worsening in asset-quality metrics; (2) return on assets ratio deteriorates significantly, owing to lower core profits or increased credit costs; or (3) capital buffer declines continuously over several quarters, indicating a deterioration in the loss-absorption buffer.

What Could Change the Rating Up/Down - Oversea-Chinese Banking Corp Ltd

Improvements in the operating environment for banks in Singapore, as well as in OCBC's financial metrics, would be credit positive for the BCA.

OCBC's ratings could be downgraded if its BCA is lowered. All other rating factors constant, the BCA of the bank would come under downward pressure if (1) gross NPL ratio exceeds 2%; (2) the return on assets ratio deteriorates significantly due to lower core profits or increased credit costs; or (3) the core capital buffer declines continuously over several quarters, indicating a deterioration in loss-absorption buffers.

The ratings might come under negative pressure if we consider OCBC's corporate behaviour and risk management as less than exemplary.

What Could Change the Rating Up/Down - United Overseas Bank Limited

Similar to DBS and OCBC, UOB's BCA will benefit from improved operationg conditions in Singapore. Substantial improvements in UOB's financial metrics would also be credit positive for the bank's BCA.

UOB's ratings could be downgraded if the bank's BCA is lowered. All other rating factors constant, UOB's BCA would come under downward pressure if (1) the NPL ratio exceeds 2%; (2) return on assets ratio deteriorates significantly due to lower core profits or increased credit costs; or (3) capital buffers decline continuously over several quarters, indicating a deterioration in loss-absorption buffers.

The ratings will also come under negative pressure if we assess that UOB's corporate behaviour and risk management are less than exemplary.

What Could Change the Rating Up/Down - Bank of Singapore Limited

The BCA of BOS could be raised if the bank improves its operating efficiency and profitability metrics, while maintaining excellent asset quality and robust capital.

A downgrade of Singapore's sovereign rating or BOS' Adjusted BCA, or both, would lower BOS' deposit ratings.

In addition, BOS' ratings could be downgraded if the bank's fundamentals weaken, as illustrated by a more challenging operating environment or deteriorating financial metrics, or both.

What Could Change the Rating Up/Down - Standard Chartered Bank (Singapore) Limited

SCBSL's ratings and assessments are on review for downgrade, and are unlikely to be upgraded in the next 12-18 months.

Moody's will likely downgrade the BCA of the bank by one notch once the bank receives all the necessary approvals for consolidation with the Singapore Branch of Standard Chartered Bank.

LIST OF ASSIGNED RATINGS

DBS Bank Ltd. --

Local and foreign currency long-term Counterparty Risk Ratings of Aa1

Local and foreign currency short-term Counterparty Risk Ratings of P-1

DBS Bank Ltd., Hong Kong Branch --

Local and foreign currency long-term Counterparty Risk Ratings of Aa1

Local and foreign currency short-term Counterparty Risk Ratings of P-1

DBS Bank Ltd., London Branch --

Local and foreign currency long-term Counterparty Risk Ratings of Aa1

Local and foreign currency short-term Counterparty Risk Ratings of P-1

Oversea-Chinese Banking Corp Ltd --

Local and foreign currency long-term Counterparty Risk Ratings of Aa1

Local and foreign currency short-term Counterparty Risk Ratings of P-1

Oversea-Chinese Banking Corp Ltd, Sydney Branch --

Local and foreign currency long-term Counterparty Risk Ratings of Aa1

Local and foreign currency short-term Counterparty Risk Ratings of P-1

United Overseas Bank Limited --

Local and foreign currency long-term Counterparty Risk Ratings of Aa1

Local and foreign currency short-term Counterparty Risk Ratings of P-1

United Overseas Bank Limited, Sydney Branch --

Local and foreign currency long-term Counterparty Risk Ratings of Aa1

Local and foreign currency short-term Counterparty Risk Ratings of P-1

Standard Chartered Bank (Singapore) Limited --

Local and foreign currency long-term Counterparty Risk Ratings of Aa2 on review for downgrade

Local and foreign currency short-term Counterparty Risk Ratings of P-1 on review for downgrade

Bank of Singapore Limited --

Local and foreign currency long-term Counterparty Risk Ratings of Aa1

Local and foreign currency short-term Counterparty Risk Ratings of P-1

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.

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.

Eugene Tarzimanov
VP - Senior Credit Officer
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
Client Service: 852 3551 3077

Graeme Knowd
MD - Banking
Financial Institutions Group
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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