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Rating Action:

Moody's places subordinated debt ratings of 12 GCC banks on review for possible downgrade; all other ratings and outlooks unaffected

06 Mar 2013

Limassol, March 06, 2013 -- Moody's Investors Service has today placed on review for possible downgrade the subordinated debt ratings of 12 banks in the six Gulf Cooperation Council (GCC) countries, namely Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Oman and Bahrain. The affected banks are Arab National Bank, Banque Saudi Fransi, Abu Dhabi Commercial Bank, Emirates NBD PJSC, First Gulf Bank, Mashreqbank PSC, Commercial Bank of Qatar, Doha Bank, Qatar National Bank, Burgan Bank, Bank Muscat and BBK B.S.C.

All other ratings and outlooks for these issuers remain unaffected.

The purpose of Moody's ratings review is to assess the evolving risk profile of these subordinated debt instruments given (i) the recent global and prudential trends towards imposing losses on junior creditors in the context of government support, and (ii) the implementation of Basel III, which will require Tier 2 instruments to have 'loss absorption' features.

Moody's has previously discussed its views on subordinated debt instruments in the Special Comment entitled "Supported Bank Debt Ratings at Risk of Downgrade due to New Approaches to Bank Resolution," which was published in February 2011.

A list of affected debt instruments is provided towards the end of this press release. Approximately US$4 billion of securities are affected.

RATINGS RATIONALE

While Moody's continues to view government support for banks across GCC countries as high, the rating agency's decision to initiate a review for possible downgrade of the 12 banks' subordinated debt ratings is driven by the growing risk of 'bail-ins' for subordinated debt instruments. This is as a result of Basel III guidelines on bank capital and regulatory efforts aimed at enhancing market discipline.

Basel III, which Moody's expects will be implemented in all GCC countries over the next few years, requires that Tier 2 debt has loss-absorbing features that can be applied upon the provision of government support. Despite the absence of loss absorption features in outstanding instruments, Moody's has observed regulators in other jurisdictions using their statutory powers to share losses with existing subordinated debt holders. These recent developments increase the risk of burden-sharing among creditors for subordinated debt outside of insolvency proceedings when receiving government support.

Although policy signals by GCC regulators on burden-sharing for subordinated debt instruments remain limited, Moody's recognises that the local authorities, like their global counterparts, are generally keen to reduce the moral hazard that is present within such supportive systems.

Moody's rating review will therefore focus on the risk that local regulators and support providers may impose burden-sharing losses on holders of subordinated debt, which is increasingly the prevailing policy globally. The outcome of the review will determine whether Moody's will continue to fully incorporate government support into its assumptions for subordinated debt ratings.

LIST OF AFFECTED RATINGS

Arab National Bank

- Long-term global foreign currency subordinated debt rating of A2, placed on review for possible downgrade

- Long-term global foreign currency subordinated debt program rating of (P)A2, placed on review for possible downgrade

Banque Saudi Fransi

- Long-term global foreign currency subordinated debt program rating of (P)A1, placed on review for possible downgrade

- Currently there is no outstanding and rated subordinated debt for this program

Abu Dhabi Commercial Bank

- Long-term global foreign currency subordinated debt rating of A2, placed on review for possible downgrade

ADCB Finance (Cayman) Limited. (Abu Dhabi Commercial Bank)

- Long-term global foreign currency subordinated debt program rating of (P)A2, placed on review for possible downgrade

- Currently there is no rated subordinated debt for this program

Emirates NBD PJSC

- Long-term global foreign currency subordinated debt program rating of (P)Baa2, placed on review for possible downgrade

- Currently there is no outstanding and rated subordinated debt for this program

Emirates NBD Global Funding Limited

- Long-term global foreign currency subordinated debt program rating of (P)Baa2, placed on review for possible downgrade

- Currently there is no outstanding and rated subordinated debt for this program

Emirates Bank International PJSC

- Long-term global foreign currency subordinated debt rating of Baa2, placed on review for possible downgrade

First Gulf Bank

- Long-term global foreign currency subordinated debt program rating of (P)A3, placed on review for possible downgrade

- Currently there is no outstanding and rated subordinated debt for this program

MashreqBank PSC

- Long-term global foreign currency subordinated debt rating of Baa3, placed on review for possible downgrade

- Long-term global foreign currency subordinated debt program rating of (P)Baa3, placed on review for possible downgrade

Commercial Bank of Qatar

- Long-term global foreign currency subordinated debt program rating of (P)A2, placed on review for possible downgrade

- Currently there is no outstanding and rated subordinated debt for this program

CBQ Finance Limited. (Commercial Bank of Qatar)

- Long-term global foreign currency subordinated debt rating of A2, placed on review for possible downgrade

- Long-term global foreign currency subordinated debt program rating of (P)A2, placed on review for possible downgrade

Doha Bank Q.S.C.

- Long-term global foreign currency subordinated debt rating of A3, placed on review for possible downgrade

- Long-term global foreign currency subordinated debt program rating of (P)A3, placed on review for possible downgrade

Doha Finance Limited. (Doha Bank Q.S.C.)

- Long-term global foreign currency subordinated debt program rating of (P)A3, placed on review for possible downgrade

-Currently there is no outstanding and rated subordinated debt for this program

QNB Finance Ltd (Qatar National Bank)

- Long-term global foreign currency subordinated debt program rating of (P)A1, placed on review for possible downgrade

- Currently there is no outstanding and rated subordinated debt for this program

Burgan Finance No1 (Jersey) Ltd. (Burgan Bank SAK)

- Long-term global foreign currency subordinated debt rating of Baa1, placed on review for possible downgrade

BankMuscat S.A.O.G.

- Long-term global foreign currency subordinated debt program rating of (P)A2, placed on review for possible downgrade

- Currently there is no outstanding and rated subordinated debt for this program

BBK B.S.C.

- Long-term global foreign currency subordinated debt rating of Baa3, placed on review for possible downgrade

- Long-term global foreign currency subordinated debt program rating of (P)Baa3, placed on review for possible downgrade

The principal methodology used in these ratings was Moody's Consolidated Global Bank Rating published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The Local Market analyst for rating MashreqBank psc, and First Gulf Bank, is Nitish Bhojnagarwala, +9714-237-9563.

The Local Market analyst for rating Emirates NBD PJSC, and Abu Dhabi Commercial Bank, is Khalid F. Howladar, +971.4.237.9542.

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 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 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.

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.

Nondas Nicolaides
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Cyprus Ltd.
Kanika Business Centre
319 28th October Avenue
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Yves J Lemay
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Cyprus Ltd.
Kanika Business Centre
319 28th October Avenue
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's places subordinated debt ratings of 12 GCC banks on review for possible downgrade; all other ratings and outlooks unaffected
No Related Data.
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