New York, March 17, 2015 -- Moody's Investors Service has today announced multiple rating actions
following yesterday's publication of its new bank rating methodology,
which now is the primary methodology for Moody's bank ratings globally.
The rating actions affect 1,021 out of 1,934 rated banking
entities, which include operating banks, holding companies,
subsidiaries, special purpose issuance conduits, branches
and other entities for which Moody's has assigned ratings to at
least one debt class. Within this total group of entities,
856 are assigned baseline credit assessments (BCAs), of which 147
are affected. These total numbers refer to the banks that are covered
under this press release, as certain bank ratings in a small number
of countries (Japan, Bolivia, Brazil, Argentina,
and Russia) will be discussed in separate local press releases.
Moody's has placed the following ratings and assessments on review:
1) 147 BCAs: 84 for upgrade and 63 for downgrade;
2) 421 long-term deposit ratings: 314 for upgrade,
96 for downgrade and 11 direction uncertain; and,
3) 451 senior unsecured debt and issuer ratings: 214 for upgrade,
212 for downgrade and 25 direction uncertain.
At the same time, Moody's has affirmed 124 long-term
deposit ratings and 147 senior unsecured debt and issuer ratings.
"Our fundamental approach to bank ratings has not changed dramatically,
but we have introduced a number of new tools to enhance our analysis,
which has resulted in these rating reviews," said Greg Bauer,
Moody's Co-head of Global Banking. "These reviews
are prompted by our new methodology, which we are confident will
enable us to appropriately reflect the rapidly evolving global banking
environment as it continues to develop."
Additionally, Moody's has withdrawn for business reasons inputs
to ratings in the form of bank financial strength ratings (BFSRs) and
ratings for other senior obligations (OSOs). Separate lists of
withdrawn BFSRs and OSOs are available at the bottom of this press release.
Going forward the BCA will be the only indicator of issuers' standalone
intrinsic strength. In a few cases where a BFSR was previously
on review, this review has now been assigned to the BCA.
The reviews follow yesterday's publication of Moody's updated
bank rating methodology, which incorporates several new elements
designed to help accurately predict bank failures and determine how each
creditor class is likely to be treated when a bank fails and enters resolution,
reflecting insights gained from the crisis and the fundamental shift in
the banking industry and its regulation.
Key changes include the addition of a Macro Profile, a new Financial
Profile and a Loss Given Failure (LGF) analysis framework, all of
which are described below. The first two elements primarily affect
the positioning of a bank's BCA, while the last one can lead,
through the assessment of instrument volume and subordination levels and
of expected treatment by resolution authorities, to changes in long-term
issuer, deposit and debt ratings. Please refer to the press
release "Moody's publishes its new bank rating methodology,"
published on 16 March 2015
http://www.moodys.com/viewresearchdoc.aspx?docid=PR_320662.
Separate from the implementation of the updated bank rating methodology,
Moody's has also lowered its expectations about the likelihood of
government support for European banks in light of the introduction of
the Bank Recovery and Resolution Directive (BRRD) in the European Union
and the move toward similar frameworks with provisions for burden-sharing
with senior creditors in Switzerland, Norway and Liechtenstein.
In anticipation of this decline in support, on 29 May 2014,
Moody's changed the outlook for the long-term ratings on
82 European banks to negative and maintained the outlooks for the 74 banks
that already had negative outlooks or whose ratings were on review for
downgrade.
Moody's has concluded that the probability of support to even systemically
important banks across the region has declined. However,
the impact on ratings is moderated -- and in some cases
wholly or more than offset -- by a decline in expected loss
assumptions under the new LGF framework. Later today, Moody's
will publish a more detailed report on the diminished probability of government
support in European bank ratings.
The updated bank rating methodology published on 16 March 2015 will be
the primary methodology for all Moody's bank ratings, including
ratings that have not been placed on review. This updated bank
rating methodology is being implemented on a global basis, except
in jurisdictions where certain regulatory requirements must be fulfilled
prior to implementation.
Please click on this http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_179911
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
NEW ELEMENTS OF THE BANK RATING METHODOLOGY
Moody's updated bank rating methodology introduces several new elements
that will affect ratings to varying degrees across countries and regions.
-- BCA: NEW BCA SCORECARD FOCUSED ON MACRO PROFILE
AND CORE FINANCIAL RATIOS
Moody's new Financial Profile takes as its starting point five solvency-
and liquidity-related financial ratios that are predictive of bank
failure: asset risk, capital, profitability, funding
structure and liquid resources. The Financial Profile also incorporates
a broader range of supplementary ratios, Moody's forward-looking
expectations and other relevant qualitative considerations. Joining
these as a new input in determining the BCA is the Macro Profile,
which explicitly captures banking system-wide pressures that have
been shown to be predictive of a bank's propensity to fail.
Impact on Baseline Credit Assessments
Globally, Moody's expects the enhanced approach to have a
generally modest positive impact on banks' BCAs, with changes
concentrated among European banks. These likely changes will generally
be the result of the application of the new scorecard framework,
which provides additional tools to assess banks' credit fundamentals.
(See below for regional breakdowns.)
-- LONG-TERM RATINGS: LOSS GIVEN FAILURE,
RESOLUTION AND GOVERNMENT SUPPORT
The LGF analysis assesses the potential impact of a bank's failure
on its various debt classes and deposits in the absence of any government
support. Under its new methodology, Moody's applies
an Advanced LGF to banks subject to operational resolution regimes,
wherein authorities can impose losses on creditors selectively outside
of liquidation, and for which specific legislation provides a reasonable
degree of clarity on how the bank's failure could affect depositors
and other creditors. The Basic LGF analysis applies to those banks
that are not subject to operational resolution regimes.
Impact on Long-Term Ratings
1) In the US, Moody's expects generally positive effects on
bank deposit ratings and mixed, though net negative, effects
on senior unsecured debt ratings, reflecting explicit deposit preference
in resolution, which benefits depositors at the expense of senior
unsecured debt.
2) In the EU, Switzerland, Norway and Liechtenstein,
Moody's expects a positive effect on long-term deposit ratings,
albeit more modest compared to the US, and a generally neutral effect
on senior unsecured debt ratings. For banks whose long-term
ratings are being affirmed or placed on review for upgrade, in general,
the separate actions taken related to the diminished probability of government
support are wholly or more than offset by the benefit of instrument volume
and subordination protecting creditors from losses in resolution under
the Advanced LGF approach.
3) In all other regions covered through this press release, Moody's
will apply its Basic LGF approach, in the absence of regulatory-driven
operational resolution regimes. However, Moody's expects
a small negative effect on senior unsecured and deposit ratings in some
systems, reflecting the change in its view that the capacity for
government support is limited to the government's bond rating,
and that going forward there will be little scope for other policy tools
to provide durable support beyond this constraint.
The sections below summarize the key likely rating changes by region following
the conclusion of Moody's review for banks covered through this
press release. The affected ratings refer to banking entities,
rather than consolidated banking groups. Following the conclusion
of its reviews, Moody's expects to make the following rating
changes:
-- NORTH AMERICA
- The ratings of Canadian banks are unaffected.
- In the US, 290 out of 417 rated banking entities are affected.
o Moody's has assigned BCAs to 91 US banking entities, of
which 81 BCAs remain unchanged; for the remaining 10 banking entities,
the BCAs of half of these are on review for upgrade and half are on review
for downgrade.
o The long-term deposit ratings for 100 banking entities are on
review for upgrade and one is on review direction uncertain. None
are on review for downgrade, owing to the substantial volume of
deposits in US banks' liability structures, which should result
in high recovery rates.
o The senior unsecured debt and issuer ratings for 54 banking entities
(including operating and holding companies) are on review for upgrade,
and 69 are on review for downgrade. The issuer rating for one banking
entity is on review direction uncertain and the senior unsecured debt
and issuer ratings for 19 banking entities are affirmed.
o In general, for US banking entities subject to resolution under
Title II of the Dodd-Frank Act, their bank-level senior
unsecured debt and issuer ratings are on review for upgrade given the
substantial loss absorbing capital subordinated to them as well as the
reduced loss assumption of an expected going concern resolution under
the single point of entry resolution framework. At the holding
company level, the senior unsecured debt ratings of several of these
firms may benefit from the substantial thickness of this debt tranche
as well as the amount of debt subordinated to it.
o For most US banking entities subject to Title I resolution, their
deposit ratings are on review for upgrade and their bank-level
senior unsecured debt and issuer ratings are on review for downgrade.
The deposit ratings are most influenced by their substantial size.
The senior unsecured debt and issuer rating actions result from the limited
amount of senior unsecured debt outstanding, the lack of a substantial
debt tranche subordinated to it, and the higher loss assumption
under a Title I receivership-based resolution approach.
Therefore, bank-level senior unsecured debt ratings could
be reduced to the same level as the holding company senior unsecured debt
ratings, which are largely unaffected by this review.
-- EUROPEAN UNION AND OTHER WESTERN EUROPE
- The ratings on 609 out of 800 banking entities are affected.
- A BCA is assigned to 278 banking entities. Moody's
expects to make changes to the BCAs of some European banking entities,
with 53 BCAs on review for upgrade and 30 on review for downgrade as a
result of the additional tools provided in the new scorecard framework.
The BCAs on review for upgrade are concentrated in the Nordics,
the United Kingdom, Germany, France, Spain and Luxembourg.
The BCAs on review for downgrade are primarily for banking entities in
Austria, Greece and Italy.
- The bulk of long-term deposit ratings (for 187 banking
entities) and senior unsecured debt and issuer ratings (for 154 banking
entities) are on review for upgrade, because the combination of
instrument volume and subordination results in an expected loss under
the LGF analysis sufficiently low to more than offset the diminished expectations
of government support. The latter will be further discussed in
a more detailed report that will be published later today.
- A much smaller number of long-term deposit ratings (for
48 banking entities) are on review for downgrade, because fewer
banking entities are affected by the decline in government support compared
to the benefit their deposit ratings receive under the LGF framework.
Nevertheless, senior unsecured debt and issuer ratings for 95 banking
entities are on review for downgrade, reflecting more limited degrees
of instrument volume and subordination compared to deposits in the banks'
liability structures.
- Additionally, 96 banking entities' long-term
deposit ratings and 116 banking entities' senior unsecured debt
and issuer ratings have been affirmed, typically because the result
of a change in government support assumption is offset through the LGF
framework. Some deposit ratings (for 10 banking entities) and senior
unsecured debt and issuer ratings (for 24 banking entities) are on review
direction uncertain.
-- COMMONWEALTH OF INDEPENDENT STATES (CIS) AND WESTERN
ASIA
- Only 14 out of 149 CIS banking entities are affected by the review.
Moody's has assigned BCAs to 138 banking entities, of which
five BCAs are on review for upgrade and nine are on review for downgrade.
- Eleven deposit ratings (including both local and foreign currency
ratings) are on review for upgrade, and eleven are on review for
downgrade, generally in the same direction as the change Moody's
expects to make to the banks' BCAs.
- Similarly, the senior unsecured debt rating of one banking
entity is on review for upgrade and for one banking entity on review for
downgrade, again as a result of the review on the BCA.
-- ASIA PACIFIC (EXCLUDING JAPAN)
- Among the total of 290 rated banking entities in the region,
excluding those of Japanese banks, which are covered through a local
press release, ratings on 65 banking entities are affected.
Within this total group of banking entities, 158 are assigned BCAs,
of which 20 BCAs are affected: 15 are on review for upgrade and
five are on review for downgrade. The reviews for upgrade are concentrated
among banks in Taiwan (4), the Philippines (3), Malaysia (3)
and Indonesia (2), and are driven by the positioning of a bank's
credit strength in a global context under the new scorecard framework.
- Long-term deposit, issuer and senior unsecured debt
ratings are generally unaffected, given that banks in the region
are not subject to operational resolution regimes and government support
expectations therefore remain largely unchanged. However,
among Asia Pacific banking entities covered through this press release,
17 long-term deposit and 29 senior unsecured debt and issuer ratings
(including both local and foreign currency ratings) are on review for
downgrade. This is largely driven by the change in Moody's
view that the capacity for government support is limited to a government's
bond rating, rather than the previous expectation that banks in
India, Thailand and Malaysia could benefit from additional support
through other policy tools.
- Ten banking entities' long-term deposit and five
banking entities' senior unsecured debt and issuer ratings are on
review for upgrade, generally reflecting the expectations of an
increase in those banking entities' BCAs. Long-term
deposit ratings of 28 banking entities and senior unsecured debt and issuer
ratings of 12 banking entities are affirmed.
-- LATIN AMERICA
- The ratings on 32 out of 103 banking entities covered through
this press release are affected. Moody's has assigned a BCA
to 75 banking entities, of which six BCAs are on review for upgrade
and 12 are on review for downgrade. Of these, three Brazilian
banking entities' BCAs, which currently are higher than the
government bond rating, are on review for downgrade, with
the expectation of aligning them with the government's rating.
Other BCAs are generally on review for upgrade or downgrade as the new
scorecard framework provides additional tools to position a bank's
credit strength in a global context.
- Long-term deposit, issuer and senior unsecured debt
ratings are generally unaffected. Nevertheless, six banking
entities' long-term deposit ratings are on review for upgrade,
generally owing to the expectation that these banks' BCAs will be
raised.
- Additionally, 11 banking entities' long-term
deposit and 18 banking entities' senior unsecured debt or issuer
ratings are on review for downgrade, largely owing to the review
for downgrade on these banking entities' BCAs and/or the change
in Moody's view that the capacity for government support is limited
to a government bond rating, rather than the previous expectation
that banks in Chile, Colombia and Guatemala could benefit from additional
support through other policy tools.
-- MIDDLE EAST AND AFRICA
- Only 11 out of 133 banking entities are affected by the review.
Moody's has assigned a BCA to 106 banking entities, of which
two BCAs are on review for downgrade under the new scorecard framework.
- The deposit ratings of nine banking entities are on review for
downgrade, one of which is driven by the review of the BCA.
The other eight banking entities' long-term deposit ratings
of the banks in Pakistan, Morocco and Jordan are on review for downgrade
as a result of the change in Moody's view that the capacity of the
government to provide support is limited to the government's own
creditworthiness, as implied by its bond rating, rather than
the previous expectation that banks could benefit from additional support
through other policy tools.
-- SUBORDINATED DEBT, BANK HYBRIDS AND CONTINGENT
CAPITAL SECURITIES
Changes in a bank's BCA will, in most instances, affect the
ratings of its junior securities. This reflects the general assumption
that these instrument ratings do not benefit from government support.
Therefore, for banks whose BCAs have been placed on review,
Moody's has also extended the review to the ratings on subordinated debt,
bank hybrids and contingent capital securities. Additionally,
some holding company junior instrument ratings have been placed on review
for upgrade owing to a smaller notching differential versus the BCA under
Moody's LGF analysis, depending on the amount of issuance
of the same instrument class and the amount of more subordinated instruments.
SCOPE OF THE REVIEW
Whenever credit rating methodologies are revised, the updated methodology
is applied to all relevant credit ratings. Accordingly, Moody's
places on review the ratings of those banks that are likely to be affected.
Moody's expects to conclude the majority of its reviews in the coming
few months. During the review period, Moody's will assess
the impact of the new methodology on rated instruments and will focus
on the following in particular:
1) BCA analysis, which will incorporate 2014 full-year data,
if available, and entail further assessment of fundamental credit
trends in the context of the new scorecard;
2) Advanced LGF analysis, which will incorporate 2014 full-year
data, if available, and entail further analysis of banks and
their securities for which subordination levels and volume thresholds
are likely to lead to a change in LGF notching; and/or,
3) Government support analysis, which will entail further analysis
on Moody's revised view on potential government support in Europe.
LIST OF AFFECTED CREDIT RATINGS
Below is the link to access the list of Affected Credit Ratings which
includes the full list of affected ratings covered by this press release.
This list also provides guidance on the likely outcomes for the deposit
and senior unsecured debt ratings on review.
The affirmations of long-term ratings are due to a change in the
standalone assessment or support assumption being offset through other
components of the new rating framework, such as LGF. This
particularly affects European bank long-term deposit and senior
unsecured debt ratings, where a reduction in government support
is offset by uplift through the advanced LGF.
Moody's has withdrawn its BFSRs as well as ratings on OSOs.
Moody's has withdrawn these ratings for its own business reasons.
Please refer to the Moody's Investors Service's Policy for Withdrawal
of Credit Ratings, available on its website, www.moodys.com.
The List of Affected Credit Ratings, which includes a list of all
affected credit ratings, and the lists of withdrawn BFSRs and OSOs
rating are an integral part of this press release and identify each affected
issuer covered by this press release:
- Overall List of Affected Credit Ratings: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_179911
- List of withdrawn BFSRs: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_179884
- List of withdrawn ratings for OSOs: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_179823
Owing to local regulatory requirements, certain bank ratings in
a small number of countries (Japan, Bolivia, Brazil,
Argentina, and Russia) will be discussed in local press releases;
those rating actions are not covered by this press release. Please
refer to the additional press releases on www.moodys.com.
RELATED RESEARCH REFERENCES
For further details please refer to the following:
- New Methodology Microsite: https://www.moodys.com/microsites/brm/index.html
- Press release: Moody's publishes its new bank rating
methodology
http://www.moodys.com/viewresearchdoc.aspx?docid=PR_320662
- Bank rating methodology: Rating Methodology: Banks
- March 2015
(http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_179038);
and
- Frequently asked questions: Bank Rating Methodology:
Responses to Frequently Asked Questions
(https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1002868).
Please see the credit opinions of specific issuers on www.moodys.com
for the more detailed implications of the issuer rating actions.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in June 2014 entitled "Mapping Moody's National
Scale Ratings to Global Scale Ratings".
REGULATORY DISCLOSURES
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_179911
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
* Local Market 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 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.
Gregory Winans Bauer
MD - Global Banking
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
Frederic Drevon
MD - Global Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
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 reviews global bank ratings
