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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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Related Issuers
Rating Action:

Moody's assigns provisional long-term deposit rating of (P)A1 to Barclays' Ring-Fenced Bank

30 Oct 2017

London, 30 October 2017 -- Moody's Investors Service ("Moody's") has today assigned a provisional long-term deposit rating of (P)A1 and a standalone baseline credit assessment (BCA) of a3 to Barclays Bank UK PLC (BB UK), the future ring-fenced bank of Barclays Plc (Barclays, LT issuer rating Baa2 negative). The rating assignment reflects Moody's assessment that BB UK will have moderate asset risk, robust capitalization, solid funding and adequate liquidity.

"We expect Barclays Bank UK to benefit from good and stable profits from retail and business banking activities, which are underpinned by the bank's strong franchise in the UK," said Mr. Andrea Usai, a Senior Vice President at Moody's. "Nonetheless, we also expect that the bank's profitability could be challenged by weakening operating conditions in the UK and residual conduct costs over the next 12 to 18 months."

Moody's has also assigned Counterparty Risk Assessments (CRA) of Aa2(cr)/Prime-1(cr) and a provisional short-term deposit rating of (P)Prime-1 to BB UK.

As a large UK banking group with deposits from retail and business customers that amount to more than GBP25 billion, Barclays will be required to separate its retail and business banking businesses from its other operations, as part of the implementation of UK structural reforms ("ring-fencing"). Management has indicated it will transfer the group's ring-fenced operations to BB UK during 2018, well ahead of the 1 January 2019 implementation deadline.

The assignment of the (P)A1 provisional long-term deposit rating to BB UK reflects Moody's expectation for an a3 standalone BCA and incorporates a one-notch uplift resulting from its advanced Loss Given Failure (LGF) analysis. The (P)A1 long term deposit rating also includes one notch of government support, reflecting Moody's assessment of a moderate probability of support for BB UK from the government of the United Kingdom (Aa2 stable), if required.

Moody's will convert the assigned provisional deposit ratings of (P)A1/(P)Prime-1 to final definitive ratings, conditional on the set-up of BBUK in line with its expectation in 2018.

A list of assigned ratings is available at the bottom of this press release.

RATINGS RATIONALE

The assignment of an a3 BCA for BB UK reflects Moody's expectation that Barclays' ring-fenced bank will have (1) moderate asset risk, given that its activities will focus predominantly on secured and unsecured lending to retail and business customers, (2) robust capitalisation and adequate leverage, (3) good and stable profits from the retail and business banking activities, underpinned by the bank's strong franchise in the UK. However, Moody's expects BB UK to hold a higher proportion of problem loans than rated peers, partly reflecting higher exposures to unsecured retail and business lending. Moody's also expects that BB UK's profitability could be challenged by the weakening operating conditions in the UK and residual conduct costs, over the next 12-18 months. The a3 BCA also incorporates Moody's assessment of BB UK's (4) solid funding profile, owing to a large deposit base and limited reliance on wholesale funding; and, (5) adequate liquidity.

The (P)A1 provisional long-term deposit rating includes a one-notch uplift resulting from Moody's advanced LGF analysis, indicating that BB UK's junior depositors will face low losses given failure. The rating also incorporates an additional notch in respect of government support, reflecting Moody's assessment of a moderate probability of support for the bank's junior depositors, from the government of the United Kingdom if required, reflecting BB UK's systemic importance within the UK financial sector.

WHAT COULD MOVE THE RATINGS UP/DOWN

An upgrade of the bank's a3 BCA could result from a much stronger credit risk profile, a considerable increase in profitability and liquidity. A higher BCA could then lead to a rating upgrade. An upgrade of BB UK's long-term deposit rating could also result from a higher stock of bail-in-able liabilities that would provide higher protection for junior depositors, beyond what Moody's currently expects.

The bank's a3 BCA could be downgraded in the case of a deterioration in operating conditions in the UK, beyond Moody's current expectations, which would weaken BB UK's credit quality profile and profitability. Material weakening of the bank's asset risk and liquidity profile, lower capitalisation or risk management failure could also lead to a lower BCA. A downgrade of the BCA would then likely lead to a rating downgrade. The rating could also be downgraded due to a reduction in the stock of bail-in-able liabilities that would reduce the degree of protection for junior depositors.

LIST OF ASSIGNED RATINGS

Issuer: Barclays Bank UK PLC

Assignments:

....LT Bank Deposits, Assigned (P)A1

....ST Bank Deposits, Assigned (P)P-1

....Adjusted Baseline Credit Assessment, Assigned a3

....Baseline Credit Assessment, Assigned a3

....LT Counterparty Risk Assessment, Assigned Aa2(cr)

....ST Counterparty Risk Assessment, Assigned P-1(cr)

Outlook Actions:

....Outlook, Assigned No Outlook

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks published in September 2017. 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.

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.

Andrea Usai
Senior Vice President
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

Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

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

No Related Data.
© 2021 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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​
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