Barclays Bank PLC's baa2 standalone credit assessment, long- and short-term debt and deposit ratings also placed on review for downgrade
London, 22 February 2018 -- Moody's Investors Service ("Moody's") placed the
Baa2 long-term issuer and senior unsecured debt ratings,
and the Prime-3 short-term issuer ratings of Barclays PLC
(Barclays) on review for downgrade.
The baa2 standalone baseline credit assessment (BCA), the A1 long-term
deposit and senior unsecured debt ratings, the Prime-1 short-term
deposit ratings and the A1(cr) long-term Counterparty Risk (CR)
assessment of the group's main operating entity Barclays Bank PLC
(Barclays Bank), were also placed on review for downgrade.
Barclays Bank's Prime-1(cr) short-term CR assessment
was affirmed.
"The review for downgrade on Barclays reflects the group's ongoing
credit weaknesses and likely impact of ring-fencing implementation,
which have been the main drivers for the negative outlook since last September",
said Mr. Andrea Usai, Senior Vice President at Moody's.
During the review, the rating agency will reassess Barclays'
overall credit profile given its ongoing credit challenges, particularly
profitability, and evaluate the likely impact on the existing creditors
of Barclays and Barclays Bank from the implementation of structural reforms
('ring-fencing') in the United Kingdom (Aa2 stable).
Moody's expects to conclude the review over the next few weeks,
when Barclays plans to transfer the group's ring-fenced operations
to Barclays Bank UK PLC (Barclays Bank UK, provisional deposit rating
(P)A1) from Barclays Bank, well ahead of the legislation coming
into force on 1 January 2019.
The full list of affected ratings can be found at the bottom of this press
release.
RATINGS RATIONALE
Barclays is reorganising its legal structure as a result of the forthcoming
requirement to separate its domestic retail and business banking businesses
from its other operations, under the UK's ring-fencing rules.
Ring-fencing regulation aims to make economically vital banking
services more resilient to financial shocks and will affect a small number
of large UK banking groups, including Barclays.
Barclays' management has indicated that on 1 April 2018 Barclays
Bank will become the group's non-ring-fenced bank.
As such, its existing UK retail and business banking activities
will be transferred to the newly formed ring-fenced bank,
Barclays Bank UK. Barclays Bank will thus become more reliant on
riskier wholesale and capital markets activities, increasing its
risk profile and earnings volatility, as well as its dependence
on wholesale funding, though its funding profile will remain diversified.
These factors will lead to a weaker standalone credit profile for Barclays
Bank.
During the review, Moody's will reassess the standalone credit profiles
of both Barclays Bank, following the transfer of ring-fenced
activities to Barclays Bank UK, and the broader Barclays group.
This will include whether the degree of diversification of the group's
operations going forward will generate a level of stable profits that
is sufficient to maintain the one-notch positive adjustment for
Business Diversification, currently included in the BCA for Barclays
Bank.
Moody's currently expresses the credit profile of the overall Barclays
group through the baa2 BCA of Barclays Bank, accounting for the
vast majority of the group's total assets, which is under
negative pressure and will be reassessed during the review period.
Barclays Bank's baa2 BCA is currently supported by the group's
(1) strong franchises in UK retail, business banking and global
credit cards; (2) strong loan quality, which is partly offset
by tail risks from residual legacy assets, and pending high-profile
litigations; (3) improved regulatory capitalisation, albeit
potentially subject to various high-profile outstanding conduct
and litigation issues; and (4) diversified funding and sound liquidity.
The group's credit profile is however constrained by weak net profitability,
which the rating agency expects to persist over the next 12-18
months, as well as the risks stemming from the group's sizeable
capital markets activities, carrying market, counterparty
and operational risks. Moody's expects that activities will expose
the firm to higher earnings volatility.
As a result of ring-fencing implementation and the transfer of
the retail and business banking business to Barclays Bank UK from Barclays
Bank, Moody's will, for the first time, assign
a separate notional BCA to the broader Barclays group. This will
reflect the combined standalone credit profiles of the group's two
main subsidiaries Barclays Bank and Barclays Bank UK, which will
account for around 80% and 20% respectively of the group's
total assets, post ring-fencing implementation.
The rating agency will also evaluate the expected loss for each instrument
class issued by Barclays, Barclays Bank and Barclays Bank UK through
its advanced Loss Given Failure (LGF) analysis. Moody's currently
performs a single advanced LGF analysis on the Barclays' group,
which includes all entities of the group that are domiciled in the UK.
However, ring-fencing implementation will result in Moody's
performing separate advanced LGF analysis for the holding company Barclays
and the two main UK operating companies, Barclays Bank and Barclays
Bank UK. The advanced LGF analysis for Barclays Bank and Barclays
Bank UK will consider the degree of protection, which their creditors
will derive from bail-in-able liabilities issued both to
external investors and directly to Barclays. The outcome of the
respective advanced LGF analysis for Barclays, Barclays Bank and
Barclays Bank UK will also be informed by Moody's estimated loss
rate for each of these entities at the point of failure.
As part of its support analysis, Moody's will also assess
whether Barclays Bank will benefit from any affiliate support from Barclays
Bank UK, taking into account the limitations to transfers of financial
resources across the group, following ring-fencing implementation.
Finally, Moody's will assess the likelihood of a continued
assumption of a moderate probability of government support for Barclays
Bank, as the group's non ring-fenced bank.
WHAT COULD MOVE THE RATINGS UP/DOWN
The review for downgrade on the ratings for Barclays and Barclays Bank
indicates that there is a likelihood of rating downgrades upon conclusion
of the review.
The ratings for Barclays Bank could be downgraded following a downgrade
of its baa2 BCA, a weaker assessment of creditor protection resulting
from the advanced LGF analysis or a reduction of Moody's assessment
of probability of government support assumptions. Barclays Bank's
baa2 standalone BCA could be downgraded due to both ongoing credit weaknesses
and the planned transfer of its existing retail and business banking activities
to Barclays Bank UK, further weakening its standalone credit profile.
As Moody's indicated previously, Barclays Bank's BCA
could also be downgraded in case of: (1) a deterioration in the
operating environment beyond Moody's current expectations, (2) conduct
and litigation charges that are materially higher than Moody's current
estimates, (3) an increase in risk appetite or leverage, and
(4) a material deterioration in the group's liquidity or capital positions.
Barclays Bank's ratings could be confirmed if Moody's were
to conclude that the group's current credit weaknesses were likely
to be addressed over the short- to medium term, including
restoring profitability on a sustainable basis.
The ratings for Barclays could be downgraded, following Moody's
assessment of a weaker standalone credit profile of the group, given
its ongoing credit challenges, or if it were to assess that its
creditors were to be impacted by lower protection, as part of its
advanced LGF analysis assessment.
The ratings for Barclays could be confirmed if Moody's were to assess
that its credit weakness would be addressed in the short- to medium-term,
or that these would be mitigated by excess financial resources,
which it may hold at the level of the holding company.
LIST OF AFFECTED RATINGS
Issuer: Barclays Plc
Placed On Review for Downgrade:
....LT Issuer Rating, currently Baa2,
Outlook changed To Rating Under Review From Negative
....ST Issuer Rating, currently P-3
....Senior Unsecured Regular Bond/Debenture,
currently Baa2, Outlook changed To Rating Under Review From Negative
....Subordinate, currently Baa3
....Pref. Stock Non-cumulative,
currently Ba2 (hyb)
....Senior Unsecured MTN Program, currently
(P)Baa2
....Subordinate MTN Program, currently
(P)Baa3
....Other Short Term Program, currently
(P)P-3
....Senior Unsec. Shelf, currently
(P)Baa2
....Subordinate Shelf, currently (P)Baa3
....Commercial Paper, currently P-3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Barclays Bank PLC
Placed On Review for Downgrade:
....LT Issuer Rating, currently A1,
Outlook changed To Rating Under Review From Negative
....LT Bank Deposits, currently A1,
Outlook changed To Rating Under Review From Negative
....ST Bank Deposits, currently P-1
....Senior Unsecured Regular Bond/Debenture,
currently A1, Outlook changed To Rating Under Review From Negative
....Subordinate, currently Baa3
....Junior Subordinate, currently Ba1
(hyb)
....Senior Unsec. Shelf, currently
(P)A1
....Pref. Stock, currently Ba1
(hyb)
....Pref. Stock Non-cumulative,
currently Ba2 (hyb)
....Senior Unsecured MTN Program, currently
(P)A1
....Subordinate MTN Program, currently
(P)Baa3
....Other Short Term Program, currently
(P)P-1
....LT Deposit Note/CD Program, currently
(P)A1
....Commercial Paper, currently P-1
....BACKED Commercial Paper, currently
P-1
....Other Short Term, currently P-1
....Adjusted Baseline Credit Assessment,
currently baa2
....Baseline Credit Assessment, currently
baa2
....LT Counterparty Risk Assessment,
currently A1(cr)
Affirmations:
....ST Counterparty Risk Assessment,
Affirmed at P-1(cr)
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Barclays Bank PLC, Australia Branch
Placed On Review for Downgrade:
....Senior Unsecured Regular Bond/Debenture,
currently A1, Outlook changed To Rating Under Review From Negative
....Senior Unsecured MTN Program, currently
(P)A1
....Other Short Term Program, currently
(P)P-1
....Commercial Paper, currently,
P-1
....LT Counterparty Risk Assessment,
currently A1(cr)
Affirmations:
....ST Counterparty Risk Assessment,
Affirmed at P-1(cr)
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Barclays Bank of Canada
Placed On Review for Downgrade:
....BACKED Commercial Paper, currently
P-1
....LT Counterparty Risk Assessment,
currently A1(cr)
Affirmations:
....ST Counterparty Risk Assessment,
Affirmed at P-1(cr)
Issuer: Barclays Bank plc Hong Kong
Placed On Review for Downgrade:
....LT Counterparty Risk Assessment,
currently A1(cr)
....Commercial Paper, currently P-1
Affirmations:
....ST Counterparty Risk Assessment,
Affirmed at P-1(cr)
Issuer: Barclays Bank plc, Cayman Branch
Placed On Review for Downgrade:
....Commercial Paper, currently P-1
Issuer: Barclays Bank PLC, New York Branch
Placed On Review for Downgrade:
....LT Counterparty Risk Assessment,
currently A1(cr)
....Commercial Paper, currently P-1
Affirmations:
....ST Counterparty Risk Assessment,
Affirmed at P-1(cr)
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Barclays Bank PLC, Paris
Placed On Review for Downgrade:
....LT Bank Deposits, currently A1,
Outlook changed To Rating Under Review From Negative
....ST Bank Deposits, currently P-1
....Senior Unsecured MTN Program, currently
(P)A1
....LT Counterparty Risk Assessment,
currently A1(cr)
Affirmations:
....ST Counterparty Risk Assessment,
Affirmed at P-1(cr)
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Barclays Bank PLC, Singapore
Placed On Review for Downgrade:
....Commercial Paper, currently P-1
....LT Counterparty Risk Assessment,
currently A1(cr)
Affirmations:
....ST Counterparty Risk Assessment,
Affirmed at P-1(cr)
Issuer: Barclays Bank PLC, Tokyo
Placed On Review for Downgrade:
....Commercial Paper, currently P-1
....LT Counterparty Risk Assessment,
currently A1(cr)
Affirmations:
....ST Counterparty Risk Assessment,
Affirmed at P-1(cr)
Issuer: Barclays US Funding LLC
Placed On Review for Downgrade:
....BACKED Commercial Paper, currently
P-1
Issuer: Barclays Capital (Cayman), Ltd.
Placed On Review for Downgrade:
....BACKED Senior Unsecured MTN Program,
currently (P)A1
....BACKED Subordinate MTN Program,
currently (P)Baa3
....BACKED Other Short Term Program,
currently (P)P-1
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Barclays Financial LLC
Placed On Review for Downgrade:
....BACKED Senior Unsecured MTN Program,
currently (P)A1
....BACKED Other Short Term Program,
currently (P)P-1
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Barclays Overseas Investment Company B.V.
Placed On Review for Downgrade:
....BACKED Junior Subordinate, currently
Ba1 (hyb)
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
Issuer: Barclays US CCP Funding LLC
Placed On Review for Downgrade:
....Commercial Paper, currently P-1
Issuer: Woolwich plc
Placed On Review for Downgrade:
....BACKED Subordinate, currently Baa3
....BACKED Junior Subordinate, currently
Ba1 (hyb)
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
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
