NOTE: On June 05, 2015, Moody’s corrected the press release as follows: In the REGULATORY DISCLOSURES section, added the Unsolicited Ratings and Non-Participating Rated Entity disclosure items as the fourth and fifth paragraphs. In addition, in the linked List of Affected Credit Ratings, for issuers Deutsche Postbank AG, Deutsche Postbank Funding Trust I, Deutsche Postbank Funding Trust II, Deutsche Postbank Funding Trust III, Deutsche Postbank Funding Trust IV and ProSecure Funding Limited Partnership, corrected the solicitation status to unsolicited and added the applicable Participation in Unsolicited Ratings disclosure item. Revised release follows.
New York, May 28, 2015 -- Moody's Investors Service has concluded its reviews on 13 global investment
banking groups (GIBs). These reviews were initiated on 17 March
2015 (see press release at https://www.moodys.com/research/Moodys-reviews-global-bank-ratings--PR_321005)
following the publication of Moody's new bank rating methodology and also
reflect revisions in Moody's government support assumptions for
these banks.
The 13 GIBs covered in this press release are:
- Bank of America Corporation
- Barclays plc
- BNP Paribas
- Citigroup Inc.
- Credit Suisse Group AG
- Deutsche Bank AG
- The Goldman Sachs Group, Inc.
- HSBC Holdings plc
- JPMorgan Chase & Co.
- Morgan Stanley
- Royal Bank of Scotland Group plc
- Société Générale
- UBS AG
Among the actions taken today by Moody's on the key operating bank
subsidiaries of these GIBs are the following:
- 12 baseline credit assessments (BCAs) were affirmed and one was
upgraded (Morgan Stanley)
- 12 adjusted BCAs were affirmed and one was upgraded (Morgan Stanley)
- Nine long-term deposit ratings were upgraded and four
were affirmed
- 12 short-term deposit ratings were affirmed and one was
upgraded (Morgan Stanley)
- Six long-term bank issuer/senior unsecured debt ratings
were upgraded, four were affirmed, two were confirmed and
one remains on review for downgrade (UBS AG).
Further, nine of the 13 GIBs have ratings at the holding company
level, for which four long-term holding company senior unsecured
debt ratings were upgraded, four were downgraded, and one
was affirmed.
Moody's has also assigned Counterparty Risk (CR) assessments to a number
of the GIBs' operating subsidiaries and bank branches, in
line with its new bank rating methodology.
Moody's has withdrawn the outlooks for all of the junior instrument ratings
for the banking groups covered in this press release for its own business
reasons. Please refer to the Moody's Investors Service's
Policy for Withdrawal of Credit Ratings available on its Web site,
www.moodys.com.
For more information on these rating actions, please access "Key
Analytic Considerations in Our Rating Actions on Global Investment Banks"
at http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1004940
Please click on the following link to access a full list of affected credit
ratings. This list is an integral part of this press release and
identifies each affected issuer: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_181789
RATINGS RATIONALE
The new methodology includes a number of elements that Moody's has developed
to help accurately predict bank failures and determine how each creditor
class is likely to be treated when a bank fails and enters resolution.
These new elements capture insights gained from the crisis and the fundamental
shift in the banking industry and its regulation.
In light of the new bank rating methodology, Moody's rating actions
on these 13 banking groups generally reflect the following considerations:
(1) their "Strong" to "Very Strong -" bank-specific
macro profiles ; (2) the banks' adequate core financial ratios;
(3) the negative qualitative adjustments made owing to the groups' organizational
complexity and balance sheet opacity; (4) the protections offered
to depositors and senior creditors in the US, EU and Switzerland
as assessed by Moody's Advanced Loss Given Failure (LGF) analysis,
reflecting the benefit of instrument volume and subordination protecting
creditors from losses in the event of resolution; and (5) the moderate
likelihood of government support for the operating companies of most of
these banking groups and the low likelihood of such support for their
holding companies.
1) The "Strong" to "Very Strong -" bank-specific
macro profiles of the GIBs
The Macro Profile constitutes an assessment of the macroeconomic environment
in which a bank operates. Given the geographic scope of their operations,
the GIBs are exposed to macro variables across multiple countries and
regions. Most of the GIBs have a substantial portion of their exposures
in markets other than their home countries. Even though the country-specific
Macro Profile scores for the countries in which these banks are headquartered
(US, UK, Germany, France and Switzerland) are "Very
Strong -", the bank-specific Macro Profile scores
are generally one to two categories lower (three Very Strong -,
nine Strong +, and one Strong), given that the macroeconomic
conditions in each bank's home country are stronger than those of
most other countries in which it operates.
2) and 3) The banks' adequate core financial ratios and qualitative adjustments
The average BCA for the group is baa2, primarily reflecting their
asset risk profiles, and driven by (a) the counterparty, market
and operational risk exposures of the GIBs' capital markets businesses,
as well as their traditional banking activities; (b) persistent profitability
and business model challenges; and (c) high wholesale funding dependence.
In addition, Moody's makes a negative qualitative adjustment
for the opacity and complexity of these groups, which is offset
in certain cases by a positive adjustment for business diversification.
4) Protection offered to depositors and senior creditors as captured by
Moody's Advanced LGF liability analysis.
Under its new methodology, Moody's applies its Advanced LGF analysis
to the liability structures of banks subject to operational resolution
regimes, which includes all 13 of the groups covered in this press
release. This analysis resulted in upgrades or affirmations of
the long-term deposit ratings for the 13 GIBs, in recognition
of the following:
(a) the legal depositor preference in both the US and Switzerland
(b) some probability of depositor preference in the European Union under
the Bank Recovery and Resolution Directive (BRRD)
(c) the protection offered by the amount of debt subordinated to deposits
in these banking groups
All of the US and Swiss GIBs' long-term deposit ratings benefit
from three notches of uplift above the banks' adjusted BCAs (before
incorporating government support) under the LGF analysis. The EU
GIBs' long-term deposit ratings benefit from LGF to a lesser
extent, because the lack of legal depositor preference for junior
depositors makes for a lower level of subordination below this creditor
class than at the US and Swiss banks, and generally results in two
notches of uplift (three notches for Royal Bank of Scotland plc and two
notches for each of the five other EU GIBs).
At the bank level, the US GIBs' senior unsecured debt/issuer
ratings were also largely upgraded owing to the significant level of protection
they receive from the holding company instruments positioned below them
in the US creditor hierarchy, and the resulting "very low"
loss given failure. Even though the US banks' senior operating
company debt volumes are relatively small when compared to their holding
company debt tranches, their bank-level senior debt ratings
benefit from two to three notches (two notches for JPMorgan and three
notches for the four other US GIBs) of uplift above the banks' adjusted
BCAs (before incorporating government support) primarily from the subordination
benefit under the LGF framework. The European banks' senior
unsecured debt ratings benefit from LGF to a lesser extent, despite
significant volumes of senior debt at the operating company level,
because the volume of securities below this creditor class is lower,
generally resulting in two notches of uplift (three notches for Royal
Bank of Scotland plc and two notches for each of the six other European
GIBs).
At the holding company level, most of the US GIBs' senior
unsecured debt ratings were also upgraded. This reflects the higher
volume of senior debt at the holding company level, generally leading
to "low" loss given failure, or one notch of LGF uplift
for this debt class, despite it being structurally subordinated
to bank-level creditors (no LGF uplift for JPMorgan and one notch
of uplift for the four other US GIBs). In contrast, the senior
unsecured debt ratings of the European GIBs' holding companies were
downgraded, reflecting the limited volume of these securities in
their liability structures. This results in a "high"
to "moderate" loss given failure and the positioning of these
holding companies' senior ratings at or below their adjusted BCAs
(no LGF uplift for HSBC Holdings plc and Royal Bank of Scotland Group
plc, and -1 notch for Barclays and Credit Suisse).
The US GIBs' holding company subordinated debt ratings remain largely
unchanged. Each of the four European GIB holding companies'
subordinated debt ratings were upgraded by one notch as expected loss
for these securities is now fully captured in Moody's Advance LGF
Analysis.
For more information on Moody's LGF analysis and a discussion of the differences
in creditor hierarchies in the US, EU and Switzerland, please
see Moody's "How Resolution Frameworks Drive Our Creditor Hierarchies"
at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1003760?docid=PBC_1003760
(in addition to the methodology itself).
5) Lower likelihood of government support
With the implementation of bank resolution legislation that aims to shift
the cost of bank failures to shareholders and creditors, Moody's
has either eliminated or lowered its assumption about the probability
of government support for the global investment banks in the US,
the EU and Switzerland. Moody's assigns no government support
to these banks' holding company debt and a "low" to
"moderate" level of support for senior unsecured debt and
deposit ratings of the bank operating subsidiaries. As a result,
the bank senior unsecured debt and long-term deposit ratings of
the operating subsidiaries of nine of the GIBs benefit from one notch
of government support uplift, while those of the remaining three
(Goldman Sachs, Morgan Stanley and HSBC Bank plc) receive no benefit.
Moody's removed support for all junior instruments in prior rating
actions in recognition of the reduced likelihood of government support
for such instruments.
BANK-SPECIFIC CONSIDERATIONS
Moody's assessment of the credit profile (other than the five rating
drivers already discussed) of each GIB follows.
-- Bank of America Corporation and its rated affiliates
Moody's affirmed the baa2 BCA of Bank of America N.A.
The affirmation reflects the group's superior domestic retail and
commercial banking and wealth management franchises, its strong
liquidity profile and significant improvements to its capital position,
partly countered by its modest but improving profitability, the
large absolute size and funding requirements of its capital markets activities
and the bank's relatively high historical earnings volatility.
Future upward pressure on the bank's ratings could develop in the event
of the following: sustainable improvement in profitability and reduction
in earnings volatility; reduced size of capital markets operations;
and sustained enhancements to risk management and controls throughout
the firm.
Negative rating pressure could develop in the event of any of the following:
deterioration in capital or liquidity levels relative to peers and targets;
marked increase in risk appetite; major adverse legal rulings;
or indications of internal control failures.
-- Barclays plc (Barclays) and its rated affiliates
Barclays Bank's baa2 BCA was affirmed, reflecting a high,
albeit decreasing, proportion of revenues and earnings from global
investment banking activities, a regulatory capital ratio marginally
below that of its peers, an improved leverage position, now
in line with the average of its European peers, and Moody's
expectation of the successful completion of Barclays' 2016 plan.
The BCA also reflects the bank's strong franchises in UK retail and business
banking and in global cards, low historical earnings volatility
when compared with its global peers and adequate funding and liquidity.
Upward pressure on the bank's ratings could arise if the profitability
of the noninvestment banking businesses significantly strengthens and
capital levels increase significantly from current levels or risks in
the UK and European operating environment were to recede further.
Downward pressures could result from the partial or unsuccessful implementation
of the group's 2016 plan, a significant deterioration in the UK
housing market, a significant rise in unemployment in its primary
markets or volatility in the euro area, any additional large unexpected
losses due to control failures or litigation charges, an increase
in risk appetite or leverage, an aggressive step to reduce liquidity
or capital.
-- BNP Paribas (BNP) and its rated affiliates
Moody's affirmed BNP Paribas' BCA at baa1, in light
of the group's very strong retail and commercial banking franchises in
a variety of product lines and geographies, which provide a relatively
stable earnings stream and significant shock-absorbing capacity.
These positive rating drivers are partially mitigated by the bank's funding
structure, which continues to depend on a large amount of confidence-sensitive
wholesale funding, as well as the bank's inherently volatile capital
markets activities, the revenues of which constitute a smaller proportion
of total revenues when compared to most of BNP's global investment
bank peers.
Moody's changed the outlook on BNP's senior unsecured debt
rating to stable from negative because the firm has managed the consequences
of its large US fine and business curtailment with a limited degree of
capital and franchise erosion. In particular, the negative
impact of the US settlement on BNP's capital position has been mitigated
by the firm's earnings capacity, as well as by the only modest
franchise impairment resulting from the financial and reputational effects
of the US fine and the bank's guilty plea.
Upward ratings pressure could develop in the event of improvements in
capital and leverage ratios, a further structural improvement in
funding, a material reduction in the exposure to risks posed by
the capital markets business in the group, or a further reduction
in the credit risk posed by its Italian exposures.
Downwards ratings pressure could develop in the event of a deterioration
in the funding and liquidity profile, risk-management failures
or material unexpected losses, or worsening macroeconomic conditions.
-- Citigroup Inc. and its rated affiliates
Citibank's BCA was affirmed at baa2, reflecting the bank's strengthened
balance sheet, as well as its improving profitability and earnings
stability, which Moody's expects will continue to improve.
Management remains committed to a global wholesale and consumer strategy,
although this commitment also poses a formidable risk management challenge.
Citibank's achievement of its 2015 profitability targets will likely
require some revenue growth and an end to legal and restructuring costs.
Although Citigroup's restructuring is incomplete and execution challenges
remain, the firm's capital and liquidity positions continue to support
its baa2 standalone credit profile.
Given these challenges, an upgrade to the standalone credit assessment
is unlikely. In the longer term, material simplification
of the business model or a permanent down-sizing of the capital
markets business (neither of which Moody's expects) could lead to
upward pressure on the BCA. Downward pressure on the BCA could
result from a rise in earnings volatility compared to its peers',
or a material increase in the share of the capital markets business in
its business mix. Below-average capital or liquidity metrics
or a new pattern of risk control breakdowns could also lead to a downgrade
of the BCA.
-- Credit Suisse Group AG and its rated affiliates
Moody's affirmed the baa1 BCA of Credit Suisse AG, in light
of the more stable earnings and lower risk profile of the bank's
large global wealth management franchise and well-positioned domestic
Swiss banking franchise, a pro-active approach to risk management,
sound liquidity management and strong risk-based capital,
inclusive of high-trigger contingent capital instruments.
These strengths help offset the risks posed to creditors by the bank's
significant exposure to capital markets activities, relatively high
leverage and relatively weak, albeit improving, profitability.
Moody's also assigned a negative outlook to the long-term
deposit ratings of Credit Suisse AG and Credit Suisse International.
The negative outlook on deposits reflects fundamental pressures on the
bank, most notably its relatively weak profitability and leverage
ratio in the context of ratings that are higher than most peers'.
Profitability challenges include the potential for additional costs as
non-strategic units are wound down, pressure on efficiency,
given increasing compliance and regulatory costs, pressure on net
interest margins from low and even negative interest rates, or the
potential for additional litigation-related charges. In
addition, to boost the bank's leverage ratio, management
intends to reduce the bank's leverage exposure by between CHF110
billion and CHF140 billion by end-2015. In Moody's
view, achieving this target could pose execution risk for the bank
and hurt profitability if not managed prudently.
The outlook is stable on the long-term senior debt and issuer ratings
of Credit Suisse AG, Credit Suisse International, and the
bank's parent holding company Credit Suisse Group AG. The
stable outlook on the senior debt and issuer ratings reflects the likelihood
that the holding company will continue to issue significant amounts of
long-term debt over the medium term, driven by regulatory
pressures, which would reduce the loss given failure for both the
holding company and bank level senior creditors, potentially offsetting
the negative fundamental pressure on the bank.
Moody's does not expect upward pressure on the bank's ratings,
absent a significant and sustained reduction in the bank's reliance on
earnings from its global capital markets business. Conversely,
the ratings could decline if Moody's concludes that the bank is
unlikely to improve its profitability or its leverage ratio over the medium
term to levels more consistent with its BCA, or in the event of
any risk management or control failures, an increase in risk appetite,
a significant decline in the Swiss economy and/or deterioration in the
bank's capital levels.
-- Deutsche Bank AG and its rated affiliates
The baa3 standalone BCA of Deutsche Bank AG was affirmed and reflects
the firm's modest profitability, elevated earnings volatility and
high dependence on capital markets businesses. These challenges
are offset in part by the more stable retail banking, transaction
services and asset and wealth management franchises. Although the
firm raised a substantial amount of Tier 1 capital in 2014 to bring its
capital ratios more in line with its peers', it may require
a significant portion of fresh capital to address its exposure to future
litigation and regulatory costs.
Deutsche Bank is likely to remain more dependent on its capital markets
earnings than many of its peers, which Moody's considers is
a structural weakness that will be difficult for the firm to mitigate.
If capitalization, liquidity and asset quality do not deteriorate,
achievement of the firm's new strategic plan and a further rebalancing
of the earnings stream towards more stable businesses (combined with more
stable results from the capital markets franchise) could lead to upward
rating pressure on the BCA over the medium term. Significant weakening
of capital ratios, asset quality or liquidity compared to peers
could place downward pressure on the BCA.
As a result of Moody's LGF analysis, Deutsche Bank's
deposit rating was affirmed at A3 and assigned a positive outlook,
while Deutsche Bank's senior debt was confirmed at A3 and assigned
a negative outlook. The differing outlooks on the debt and deposit
ratings reflect the potential for legislation in Germany that could subordinate
senior debt to deposits to the benefit of depositors and to the detriment
of senior unsecured creditors.
Deutsche Bank Trust Corporation is a US bank holding that owns Deutsche
Bank Trust Company Americas (DBTCA) as well as two small closely integrated
sister companies. The affirmation of the a3 BCAs of DBTCA and its
sister companies reflects the entities' emphasis on clearing and
wealth management (as opposed to capital markets activities), as
well as strong regulatory ring fencing that bolsters capital ratios.
The customer-confidence linkage is a key constraint on the ratings
of DBTCA and its sister companies that effectively limits the BCAs of
the trust companies to three notches above the BCA of Deutsche Bank AG.
Accordingly, upward movement in the ratings of the trust companies
could be triggered by an increase in the ratings of Deutsche Bank AG.
Conversely, a decline in Deutsche Bank AG's standalone credit assessment
would put downward pressure on DBTCA's and its sister companies'
ratings given their close operational and reputational ties. Significant
deterioration in capital or liquidity metrics, as well as increased
risk-taking, evidenced by material loan growth at these US
trust companies, could also lead to a lower rating.
The ba1 BCA of Deutsche Postbank AG was affirmed, in light of the
bank's strong funding profile and the decline in its non-core
exposures. Dis-integration needs prior to a sale of Postbank
and earnings pressure in the current low interest rate environment will
continue to dampen future profits, a factor that weighs on the BCA,
as does a capital base that will likely require further strengthening
ahead of a sale. The outlook on Postbank's long-term
debt and deposit ratings is negative, reflecting several factors,
including the potential for legislation in Germany that could subordinate
senior debt to deposits to the benefit of depositors and to the detriment
of senior unsecured creditors, and the potential for deconsolidation
of the bank from Deutsche Bank over the rating outlook horizon,
which would lead Moody's to reconsider the current four notches
of uplift incorporated in Postbank's A3 debt and deposit ratings
from the bank's ba1 BCA.
-- The Goldman Sachs Group, Inc. and its banking
entities
Moody's affirmed the baa1 BCA for Goldman Sachs Bank USA and the
baa3 BCA and baa1 adjusted BCA for Goldman Sachs International Bank.
These affirmations reflect the company's superior risk management
track record, empowered and independent control functions,
prudent and comprehensive liquidity management, good expense discipline,
strong client relationships, low earnings volatility, and
well-balanced capital markets franchise. These core strengths
help mitigate the firm's heavy involvement in global capital markets activities,
its reliance on wholesale funding, the confidence-sensitivity
of customers and funding counterparties, a high degree of opacity
in risk-taking, and the significant interconnectedness with
other large capital markets intermediaries.
Moody's does not expect upward pressure on Goldman Sachs'
ratings, absent a significant decline in the company's reliance
on earnings from its capital markets business. In addition,
any indications of control or risk management failures, a marked
increase in risk appetite and/or deterioration in leverage or other capital
metrics would lead to downward pressure on the ratings.
-- HSBC Holdings plc and its rated affiliates
Moody's affirmed HSBC Bank plc's BCA at a3, in light of the
bank's strong franchise in the European banking market, particularly
in the UK, its resilient earnings from retail and commercial banking
activities, and its strong liquidity and adequate capitalization.
The a3 BCA also captures the risks resulting from its investment banking
activities, given HSBC Bank plc's role as one of the four hubs for
the HSBC group's capital markets activities, as well as its
sizeable, albeit declining, structured finance exposures.
The bank also benefits from two notches of affiliate support from the
broader HSBC Group, which Moody's estimates has an intrinsic
financial strength of a1, reflecting its strong international franchise,
relatively low historical earnings volatility and a conservative funding
profile, based on a sizeable customer deposit base.
Upward pressure on HSBC Bank plc's standalone credit assessment
could develop if the bank were to improve its profitability, efficiency
and further reduce its structured finance portfolio. The a1 adjusted
BCA could be raised in the event of an improvement in the bank's
a3 standalone credit assessment or an increase in the intrinsic financial
strength of the broader HSBC group, which would translate into higher
affiliate support uplift.
Downward pressure on HSBC Bank plc's a1 adjusted BCA could develop
in the event of deterioration in the bank's financial performance,
leading to a weakening of its capital base or to a material decline in
asset quality or weakening of the intrinsic financial strength of the
broader HSBC group, which would result in a decline in Moody's
assumptions of affiliate support.
-- JPMorgan Chase & Co. and its rated affiliates
JP Morgan's BCA was affirmed at a3, reflecting the strong
competitive position of its four franchises, the diversity of its
business mix, the stability of its earnings, and its sound
structural liquidity and solid capital ratios. The firm is well
positioned strategically to adapt to the changing environment.
The rating incorporates the substantial size and risks of JPMorgan's Corporate
and Investment Bank, which accounts for roughly 30% of earnings.
However, since 2007, the firm's risk management track record
has been above average, resulting in more stable earnings than many
peers.
Given the high BCA, upward pressure on JP Morgan's BCA is
unlikely, absent a material shrinking and de-risking of the
investment bank, which Moody's does not anticipate.
A major risk control failure or a sharp decline in capital or liquidity
could pressure the BCA.
Chase Bank USA, N.A. is the legal entity housing JPMorgan's
credit card business and a key pillar of the company's consumer
banking franchise. The downgrade of Chase Bank's standalone credit
assessment to baa2 from baa1 reflects Moody's more conservative
view of the bank's standalone liquidity profile, despite the
bank's solid position in the US credit card industry and strong profitability.
The BCA also reflects the monoline nature of the entity and the vulnerabilities
stemming from a single asset class concentration. Continued strength
of Chase USA's credit card franchise that translates into strengthened
profitability could lead to an upgrade of the BCA, while a deterioration
in asset quality could lead to a downgrade.
The affirmation of the a3 adjusted BCA reflects Moody's assumption
of the very high likelihood of support from the parent, given the
strategic importance of Chase Bank to JP Morgan's consumer franchise.
-- Morgan Stanley and its rated affiliates
Moody's upgraded the BCAs of Morgan Stanley Bank N.A.,
Morgan Stanley Bank International Limited and Morgan Stanley Bank AG to
baa2 from baa3, and their adjusted BCAs to baa1 from baa2.
The upgrades reflect the firm's increased business diversification
and prospects for improved profitability and lower earnings volatility,
superior risk-based capital ratios and improved leverage ratios,
conservative liquidity management policies and reduced reliance on short-term
funding, management's commitment to a gradualist approach to earnings
improvements and conservative capital plans, the benefit to creditors
from sustained enhancements to risk governance, management and controls.
Upward ratings pressure could develop should there be a significant reduction
in the firm's reliance on earnings from its capital markets business,
or sustainable above-peer profitability, capital, and
liquidity ratios accompanied by lower earnings volatility and the absence
of control or risk management failures. Negative ratings pressure
could develop in the event of a marked increase in risk appetite,
such as through weaker loan underwriting standards, a significant
increase in fixed-income risk-weighted assets above current
targets, an increase illiquid risk assets, or an increase
in portfolio concentrations. Negative ratings pressure could also
result from any deterioration in the firm's liquidity profile,
leverage or other capital metrics, or any control or risk management
failures.
-- Royal Bank of Scotland Group plc and its rated affiliates
Royal Bank of Scotland plc's (RBS) BCA was affirmed at ba1,
in light of the challenges the firm continues to face in implementing
its complex restructuring, its still sizeable global capital markets
business, its persistently weak, albeit improving, asset
quality and weak profitability. These factors are partly mitigated
by strong earnings from non-investment banking activities,
despite erosion owing to conduct, litigation and restructuring costs,
the group's strong de-risking track record, adequate and
improving capitalization, sound liquidity and funding positions.
Upward pressure on RBS's ba1 standalone credit assessment could develop
if the bank were to return to sustainable profitability and generate capital
organically. Further material reduction of the risks posed by the
group's overall restructuring could also lead to a higher BCA.
Downward pressure on the BCA could develop if the bank's restructuring
and de-risking strategy fails to deliver improvements in its credit
fundamentals, weakening its capital, asset quality,
profitability and efficiency. A deterioration in the operating
environment in which RBS operates or regulatory and litigation charges
substantially higher than what Moody's expects, could also
result in a reduction of the BCA.
The outlook on the ratings is stable, reflecting the material progress
the group has made over the last few quarters towards the implementation
of its multi-year restructuring, reducing downside risk.
-- Société Générale and its
rated affiliates
Moody's affirmed Société Générale's
(SG) BCA at baa2, in light of the bank's strong franchises,
good geographical diversification and broad spread of predominantly retail
banking activities, according to its universal bank model.
The baa2 BCA also captures SG's enhanced capital ratios and improved liquidity
and funding positions. These factors are partially countered by
SG's exposures to the weak and volatile economic environment in Russia
and Romania, as well as its sizeable capital markets activities
and high, albeit declining, reliance on more confidence sensitive
wholesale funding.
Upward pressure could develop on the ratings following further structural
improvements in the bank's funding and liquidity profile and a further
reduction in the weight of the group's capital markets-related
activity. Downward pressure could develop as a result of deteriorating
funding or liquidity conditions, risk-management failures
or material unexpected losses, worsening macroeconomic conditions,
a significant deterioration of the performance and stability of the Russian
businesses.
-- UBS AG and its rated affiliates
Moody's affirmed the baa2 BCA of UBS AG, in light of the bank's
superior global wealth management and domestic retail and corporate banking
franchises, as well as its strong liquidity profile and capital
position. These strengths are counterbalanced by ongoing pressure
on the bank's profitability, its relatively high historical
earnings volatility and weaknesses in risk management, governance
and controls evidenced during the financial crisis. The BCA also
reflects the steps the bank has taken since the crisis to scale back its
fixed-income capital markets activities and strengthen its risk
management and controls. Nevertheless, the bank's remaining
capital markets activities still expose bondholders to potential concentration
risks and earnings volatility, and the bank remains exposed to a
sizeable non-core and legacy portfolio that is likely to take several
years to run off.
The long-term and short-term ratings for UBS's senior
unsecured debt as well as its issuer ratings remain under review for downgrade.
The continuing review will focus on the evolution of UBS AG's balance
sheet over the next few months to see whether any changes in liability
structures lead to additional uplift to the bank's senior debt ratings
under Moody's Advanced LGF framework. Moody's expects to conclude
the review by mid-September 2015.
Upward ratings pressure could result from a significant decline in the
bank's non-core and legacy portfolio relative to its capitalization,
coupled with a sustainable improvement in profitability and earnings stability.
Upward rating pressure could also emerge if UBS were to demonstrate it
has fully embedded its improved risk management, internal processes
and controls throughout the bank. Indications of this development
would include superior comparative performance under adverse market conditions.
Any indications of control or risk management failures, an increase
in risk appetite, a significant decline in the Swiss economy or
deterioration in the bank's capital levels or targets would put downward
pressure on the ratings.
RATIONALE FOR COUNTERPARTY RISK ASSESSMENTS
Moody's has also assigned Counterparty Risk Assessments (CR Assessments)
to a number of rated global investment banks' operating subsidiaries
and their branches. CR assessments are opinions of how counterparty
obligations are likely to be treated if a bank fails, and are distinct
from debt and deposit ratings in that they (1) consider only the risk
of default rather than expected loss and (2) apply to counterparty obligations
and contractual commitments rather than debt or deposit instruments.
The CR assessment is an opinion of the counterparty risk related to a
bank's covered bonds, contractual performance obligations (servicing),
derivatives (e.g., swaps), letters of credit,
guarantees and liquidity facilities.
Moody's CR assessments for banks subject to a going-concern operational
resolution regime, which includes all key entities of these GIBs,
start with the banks' adjusted BCA and use an Advanced LGF approach
that takes into account the level of subordination in the bank's liability
structure as well as an assumption of government support. As a
result, the CR assessments of 12 of the global investment banks
are positioned four notches above the banks' adjusted BCA (three
notches for LGF and one for government support), while the CR assessment
of HSBC Bank plc is positioned three notches above the banks' adjusted
BCA (three notches for LGF and none for government support).
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
March 2015. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_181789
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:
• Unsolicited ratings
• Non participating issuers
• [EU only] participation in unsolicited ratings
• Person approving the credit rating
• Releasing office
• Lead Analyst
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 entity(ies) 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.
The ratings of rated entities Deutsche Postbank AG, Deutsche Postbank Funding Trust I, Deutsche Postbank Funding Trust II, Deutsche Postbank Funding Trust III, Deutsche Postbank Funding Trust IV and ProSecure Funding Limited Partnership were initiated by Moody's and were not requested by these rated entities.
These rated entities (Deutsche Postbank AG, Deutsche Postbank Funding Trust I, Deutsche Postbank Funding Trust II, Deutsche Postbank Funding Trust III, Deutsche Postbank Funding Trust IV and ProSecure Funding Limited Partnership) or related third parties did not participate in the rating process. Moody's was not provided, for purposes of the rating, access to books, records and other relevant internal documents of the rated entity or related third party.
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.
David L Fanger
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert Franklyn Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's concludes reviews on 13 global investment banks' ratings
