Affirms long-term ratings of 109 European financial institutions, upgrades one
London, 29 May 2014 -- Moody's Investors Service has today affirmed the long-term
ratings of 105 banks in the European Union (EU), Norway and Liechtenstein.
Of these banks, Moody's (i) changed the outlook to negative
on 81 long-term ratings, (ii) changed the outlook to stable
from positive on two long-term ratings, (iii) maintained
the outlook at stable on 18 long-term ratings and (iv) maintained
the outlook at positive on four long-term ratings.
In addition, Moody's has today upgraded the long-term
and short-term deposit ratings of Ceskoslovenska obchodna banka
a.s. (CSOB Slovakia), a fully-owned subsidiary
of KBC Bank NV, to Baa2/Prime-2 from Baa3/Prime-3,
and changed the outlook on the long-term deposit rating to negative
from stable; this takes the total number of outlook changes to negative
to 82.
Further, Moody's has today affirmed the long-term ratings
and stable outlooks assigned to four Nordic government-related
issuers (GRIs); this takes the total number of European financial
institutions whose long-term ratings have been affirmed to 109
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_171218
for the List of Affected Credit Ratings. This list is an integral
part of this press release and identifies each affected issuer.
These actions follow the recent adoption of the Bank Recovery and Resolution
Directive (BRRD) and the Single Resolution Mechanism (SRM) regulation
in the EU. The negative outlooks reflect Moody's view that,
with the legislation underlying the new resolution framework now in place
and the explicit inclusion of burden-sharing with unsecured creditors
as a means of reducing the public cost of bank resolutions, the
balance of risk for banks' senior unsecured creditors has shifted
to the downside. While Moody's support assessments are unchanged
for now, the probability has risen that they will be revised downwards
to reflect the new framework.
Moody's will continue to assess the implications of the BRRD/SRM
package for systemic support as the new framework develops and there is
further clarity as to how it might be applied in practice. Moody's
will take into account a variety of considerations (see Rating Rationale)
including those that could mitigate the credit-negative implications
for systemic support assessments. Should Moody's determine
that the probability of support has materially changed, affected
issuers' ratings would be placed under review to consider their
specific circumstances.
By EU country, 12 German banks were affected, ten French banks,
eight Austrian banks, five Swedish banks, four Italian banks,
three Dutch banks, two Spanish banks, and one UK bank.
Another 24 banks in other EU member states were also affected.
While not subject to the BRRD and SRM, 12 banks from Norway and
one bank from Liechtenstein were among those whose outlooks were changed
to negative. This reflects Moody's expectation, based
on public comments as well as their governments' track record of
mirroring EU banking regulations, that these jurisdictions will
look to introduce legislation or other tools that include mechanisms similar
to those in the BRRD.
RATINGS RATIONALE
--- AFFIRMATION OF LONG-TERM RATINGS AND CHANGE
OF OUTLOOK TO NEGATIVE
With the European Parliament's recent vote to adopt the BRRD and
SRM, the shape of the EU resolution framework is becoming increasingly
clear, says Moody's. EU officials and politicians have
repeatedly stressed their intention to protect taxpayers from bearing
the cost of future bank resolutions. The new resolution framework
is intended to give effect to this objective, including by providing
for the bail-in of senior creditors to recapitalise banks where
needed.
The BRRD is to be transposed into EU member countries' national
laws by year-end 2014, and enter into force on 1 January
2015. The clearly stated aim of including senior unsecured creditors
in any future burden-sharing, and the creation of a framework
to allow that to be realized, marks an important development,
with clear (if as yet difficult to measure) credit-negative implications
for holders of senior unsecured bank debt in Europe.
Furthermore, the SRM Regulation, applicable only to euro area
banks, creates a Single Resolution Board tasked with determining
the 'least cost' path to resolving troubled banks.
Moody's says that the existence of a central decision-making
body with the means to fund at least part of a bank resolution provides
a further limit on the potential involvement of national authorities in
the management of troubled banks. Thus making it more likely that
a resolution process would be triggered and the bail-in tool used,
to the detriment of senior unsecured creditors.
The assignment of negative outlooks to the banks covered by this action
reflects the above credit-negative developments for senior unsecured
creditors.
Moody's will continue to assess the implications of the resolution
framework for systemic support assessments as the new framework develops
and there is further clarity as to how it might be applied in practice,
including the following considerations:
--- The new framework provides some latitude for
authorities (national and supra-national) to effect a bank resolution
that does not include bail-in of senior unsecured creditors if,
for example, doing so would unduly undermine broader financial stability;
--- The complexity associated with resolving large,
cross-border banks will always be a challenge, and could
limit the use of the bail-in tool; and,
--- Losses for creditors under the new framework
could be lower than those in past insolvency proceedings, dampening
the impact on senior unsecured debt or deposit ratings.
For Allied Irish Banks p.l.c. (AIB), Moody's
has affirmed the deposit ratings with negative outlook, and affirmed
the senior debt rating with stable outlook. Specific to AIB,
this reflects that the difference in uplift due to systemic support between
AIB's senior debt and deposit ratings -- one notch and two
notches, respectively -- may be eliminated.
ADDITIONAL RATING ACTIONS
Moreover Moody's has:
--- affirmed the supported ratings and changed the
outlook to stable from positive for two banks. While the positive
outlooks were previously driven by either an improvement of the bank's
standalone rating or an improvement in the government's capacity
to provide support, the change to stable reflects the negative influence
of the BRRD/SRM framework.
--- affirmed the supported ratings and maintained
the stable outlook on 18 banks including: (i) 17 entities that are
considered domestically important, for which Moody's already
assesses a moderate probability of systemic support, and for which
Moody's does not currently expect this probability to decline to
any material degree, even after full implementation of the BRRD;
and (ii) one wind-down entity, Caisse Centrale du Credit
Immobilier de France (Baa2 stable; E/ca stable), which is already
the recipient of systemic support and for which Moody's considers
that the support mechanism in place will not be modified after implementation
of the BRRD.
--- affirmed the supported ratings and maintained
the positive outlook for four domestically important banks where either
the government's capacity to provide support is increasing --
as reflected in the positive outlook on the government bond rating --
or the bank's underlying credit strength is improving and only modest
support is factored into the current rating.
--- affirmed the long term rating and stable outlook
for four Nordic government related issuers (GRIs). Municipality
Finance plc in Finland (Aaa stable) and Kommuninvest i Sverige Aktiebolag
in Sweden (Aaa stable) are guaranteed by their local governments.
While the interaction between guaranteed debt and the bail in tool is
not entirely clear, Moody's does not currently believe that
the likelihood of governments being able or required to bail in such debt
is sufficiently high to warrant a negative outlook. Swedish Export
Credit Corporation (SEK, Aa1 stable) is already rated one notch
below the Swedish sovereign, which in Moody's view reflects
an adequate level of uncertainty over support. Kommunalbanken AS's
Aaa stable rating reflects Moody's very high expectations of support
from the Norwegian government (Aaa stable), which Moody's
believes will have greater latitude in implementing the BRRD in a manner
that would allow it to continue to support the entities it sees as closest
to the government, including Kommunalbanken.
- upgraded the long-term and short-term deposit ratings
of Ceskoslovenska obchodna banka a.s. (CSOB Slovakia),
a fully-owned subsidiary of KBC Bank NV, to Baa2/Prime-2
from Baa3/Prime-3, and changed the outlook on the long-term
deposit rating to negative from stable. This upgrade was prompted
by the strengthened financial capacity of the Belgian parent group,
KBC Bank, as indicated by Moody's upgrade on 8 May of the bank's
standalone Bank Financial Strength Rating (BFSR) to C- (mapping
to a baseline credit assessment of baa2) from D+/baa3 and the upgrade
of KBC Bank's long-term debt and deposit ratings to A2 from A3.
The assigned negative outlook reflects our systemic support assessment
imbedded in the deposit ratings and BRRD-related considerations
discussed in this press release.
Today's rating actions do not include all EU banks whose senior
unsecured debt and deposit ratings currently benefit from systemic support.
The following categories were excluded from the action:
--- Banks whose debt and deposit ratings already
carry a negative outlook (78 in total). However, Moody's
will factor in the implications of the new resolution framework in its
ongoing assessment of these ratings.
--- Banks which are subsidiaries of non-EU
parent banks and which Moody's rates using a credit substitution
mechanism (nine in total). The systemic support incorporated in
these banks' ratings reflects that received from non-EU home
governments and is not affected by the BRRD/SRM framework.
--- Banks explicitly excluded from the BRRD framework
(nine issuers) or whose debt benefits from a state guarantee Moody's
does not consider the BRRD would undermine (five issuers).
Junior debt instruments are not affected by this action. Moody's
has already removed all systemic support from junior instruments of European
banks.
Moody's has also published today a special comment entitled " Reassessing
Systemic Support for EU Banks," which provides more details on the
factors behind today's rating actions
http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_170460
Please see the subsequent individual credit opinion of each respective
issuer on moodys.com for the more detailed implications of this
rating action.
REGULATORY DISCLOSURES
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_171218
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• Principal methodologies used
• Unsolicited ratings
• Non participating issuers
• [EU only] participation in unsolicited ratings
• Person approving the credit rating
• Releasing office
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 entities 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.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_171218
for the List of Affected Credit Ratings for the specific designation of
unsolicited ratings.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_171218
for the List of Affected Credit Ratings for the specific designation of
participating issuers in unsolicited ratings.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_171218
for the List of Affected Credit Ratings for the specific designation of
non participating issuers.
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.
The relevant Releasing Office for each rating is identified under the
Debt/Tranche List section on the Ratings tab of each issuer/entity page
on moodys.com.
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.
Johannes Felix Wassenberg
MD - Banking
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 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
SUBSCRIBERS: 44 20 7772 5454
Moody's changes outlooks to negative on 82 long-term European bank ratings
