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Rating Action:

Moody's takes rating actions on five Korean securities firms

 The document has been translated in other languages

21 Jul 2020

Hong Kong, July 21, 2020 -- Moody's Investors Service has today confirmed the five Korean securities firms' ratings.

The five securities firms are KB Securities Co., Ltd. (KB Securities), Korea Investment & Securities Co., Ltd. (Korea Investment & Securities), NH Investment & Securities Co., Ltd (NH Investment & Securities), Samsung Securities Co., Ltd. (Samsung Securities), and Shinhan Investment Corp (Shinhan Investment).

At the same time, the outlooks on KB Securities, NH Investment & Securities, Samsung Securities, and Shinhan Investment have been changed to stable from ratings under review.

The outlook on Korea Investment & Securities has been changed to negative from ratings under review.

This concludes the review for downgrade initiated on these five Korean securities firms on 7 April 2020.

A list of all affected ratings is provided at the end of this press release.

RATINGS RATIONALE

The confirmation of all five securities firms' ratings take into account (1) Moody's expectation of slower risk asset growth as a result of various prudential regulatory measures recently implemented or under discussion by the Financial Supervisory Service; (2) the firms' varying degrees of measures implemented to increase long-term funding to strengthen their liquidity and funding profiles; and (3) Moody's expectation of profit recovery in the coming quarters driven by buoyant brokerage activities and mark-to-market valuation gains on bond portfolios following weak earnings in the first quarter of 2020.

New regulations that were introduced to rein in risk taking by securities firms include: (1) regulations effective since July to limit securities firms' contingent liabilities stemming from real estate projects; and (2) guidelines that mandate stricter internal controls on the sale of complex investment products such as private equity funds and structured financial products. In addition, regulators have also announced plans to enhance monitoring of key risk areas such as equity linked securities (ELS).

These five securities firms have maintained stable liquidity through the recent market volatility, partly leveraging its own liquid resources. The firms also benefited from the Bank of Korea's repurchase agreement program which provided unlimited local currency funding to eligible securities firms. Korea (Aa2 stable) also organized bond market stabilization funds of up to KRW20 trillion and equity market stabilization funds of up to KRW10 trillion to stabilize the financial markets. In addition, the Bank of Korea established a $60 billion currency swap facility with the US Federal Reserve Board in March, which helped stabilize the foreign currency market.

For all assigned standalone assessment, it takes into account the Ba1 operating environment score for Korean securities market makers, which in turn reflects Korea's strong macro level indicators and relatively mature capital markets, offset by challenging competitive dynamics.

For our rated securities firms, the level of government support is determined based on (1) firm's size and importance in the Korean capital markets; (2) the legal framework in Korea whereby firms can tap the liquidity facilities of the Bank of Korea and of Korea Securities Finance Corporation (Aa2 stable); and (3) potential extraordinary support from Korea Deposit Insurance Corporation (KDIC) to ensure financial stability in Korea. Market makers pay deposit insurance premiums to KDIC, and are covered by Korea's deposit insurance system.

KB SECURITIES:

KB Securities' A3 issuer rating incorporates its Ba2 assigned standalone assessment with a four-notch uplift based on our assumption of a very high level of support from Kookmin Bank (Bank Deposit: Aa3, Senior Unsecured: Aa3, BCA: a3, stable) via its parent, KB Financial Group Inc. (KB FG, A1 stable), and a one notch uplift based on our assumption of a moderate level of support from Korea (Aa2 stable). Moody's assessment of a very high level of affiliate support is based on (1) 100% ownership by KB FG; (2) strategic importance to the KB FG under 'One Firm strategy' playing vital role in Group's wealth management and investment bank divisions; (3) third largest profit contributor to the Group after Kookmin Bank and KB Kookmin Card Co., Ltd. (A2 stable) in 2019; and (4) reputational risk to KB FG in case it is under stress.

Moody's has lowered company's assigned standalone assessment to Ba2 from Ba1 to reflect its (1) weaker earnings and higher earnings volatility shown over the past several years compared to its peers; (2) relatively higher risk appetite driven by high portion of corporate bond holdings and continued issuance of promissory notes; (3) modest liquidity and funding profiles. At the same time, Moody's has increased the level of affiliate support by four notches from previous three notches based on a very high level of support from KB FG via Kookmin Bank to reflect KB Securities' growing strategic importance and interconnectedness within the Group. This led to the confirmation of A3 issuer rating.

The stable outlook on KB Securities reflects our expectation its risk appetite, funding and liquidity profiles will not deteriorate further in the coming 12-18 months.

KOREA INVESTMENT & SECURITIES:

Korea Investment & Securities' Baa2 issuer rating incorporates its Ba1 assigned standalone assessment and a two-notch uplift for Moody's assessment of a high likelihood of government support for the company if needed, and its very high dependence on the Korean government (Aa2 stable).

The company's assigned standalone assessment of Ba1 reflects its (1) relatively strong and stable profitability when compared to its rated peers in Korea; (2) moderate funding profile and liquidity, taking into account the available credit lines from Korea Securities Finance Corporation (KSFC, Aa2 stable); (3) moderate risk appetite, reflecting its high exposure to corporate lending; and (4) moderate but rising leverage ratio, driven by its expansion into new businesses. In addition, Korea Investment & Securities has a track record of solid corporate governance and risk management.

The negative outlook on Korea Investment & Securities reflects uncertainties around the sustainability and effectiveness of de-risking measures taken by the firm. Although multiple regulations are currently in discussion, there are multiple risk areas -- e.g. internally hedged ELS-related exposures, alternative investment acquisition and sales, stable foreign currency funding -- without announced regulatory risk controls to curb risky exposure growth. While the securities firm plans to de-risk its asset portfolio, Moody's will assess whether the improvements are sustained and assess the effectiveness of expected regulatory actions on funding, risk appetite and leverage over the next 12-18 months.

We do not incorporate any affiliate support for Korea Investment & Securities because essentially its parent, Korea Investment Holdings' main asset and earnings contribution comes from Korea Investment & Securities.

NH INVESTMENT & SECURITIES:

NH Investment & Securities' Baa1 issuer rating incorporates its Ba1 assigned standalone assessment with one notch uplift based on our assumption of a very high level of support from NongHyup Bank (NH Bank, Bank Deposit: A1, Senior Unsecured: A1, BCA: baa3, stable) via its major shareholder, NH Financial Group, and a two-notch uplift based on our assumption of a high level of support from Korea (Aa2 stable).

Moody's assessment of a very high level of affiliate support is based on (1) long-term strategic importance of the company to NH Financial Group; (2) interconnectedness within the financial group including co-investment schemes with other NH affiliates to bring synergies; (3) reputational risk to NH Financial Group in case it is under stress; (4) 49.1% ownership by NH Financial Group while rest of 50.9% owned by minority shareholders (including 10.82% owned by National Pension Service); and (5) the company utilizing its profits, via dividend upstream, to contribute to the ultimate parent National Agricultural Cooperative Federation's (NACF) agricultural programs to promote the social and economic status of farmers. NH Bank is a policy bank wholly owned by NH FG and ultimately owned by the NACF.

The company's assigned standalone assessment of Ba1 reflects its (1) moderate liquidity and funding profiles; (2) modest earnings and stable earnings volatility; (3) relatively higher risk appetite compared to its peers driven by high corporate bond holdings and continued issuance of promissory notes.

The stable outlook on NH Investment & Securities reflects our expectation its risk appetite, funding and liquidity profiles will not deteriorate further in the coming 12-18 months.

SAMSUNG SECURITIES:

Samsung Securities' Baa2 issuer rating incorporates its Ba1 assigned standalone assessment with a one notch uplift based on our assumption of a moderate level of support from its major shareholder, Samsung Life Insurance Co., Ltd. (Samsung Life), and a one notch uplift based on our assumption of a moderate level of support from Korea (Aa2 stable). Moody's assesses a moderate level of affiliate support for Samsung Securities from its parent, Samsung Life, resulting in a one-notch uplift to the ratings. This support assessment reflects the track record of support from the Samsung group as well as reputation risk from the shared brand, notwithstanding the relatively low ownership stake held by Samsung Life in Samsung Securities, and limited synergies with its parent or other affiliates.

The company's assigned standalone assessment of Ba1 reflects its (1) relatively low risk appetite and leverage compared to our rated securities firms; (2) modest earnings and stable earnings volatility; and (3) modest funding and liquidity profiles.

The stable outlook on Samsung Securities reflects our expectation its risk appetite, funding and liquidity profiles will not deteriorate further in the coming 12-18 months.

SHINHAN INVESTMENT:

Shinhan Investment's A3 issuer rating incorporates its Ba1 assigned standalone assessment with a three-notch uplift based on our assumption of a very high level of support from Shinhan Bank (Bank Deposit: Aa3, Senior Unsecured: Aa3, BCA: a3, stable) via its parent, Shinhan Financial Group Co., Ltd. (Shinhan FG, A1 stable), and a one notch uplift based on our assumption of a moderate level of support from Korea (Aa2 stable). Moody's assessment of a very high level of affiliate support is based on (1) 100% ownership by Shinhan FG; (2) long-term strategic importance to Shinhan FG and interconnectedness within the Group; (3) third largest profit contributor to Shinhan FG where its net income contribution to the Group was 8% in 2019; and (4) reputational risk to Shinhan FG in case it is under stress.

The company's assigned standalone assessment of Ba1 reflects its (1) relatively higher liquidity compared its peers; (2) modest earnings and stable earnings volatility; and (3) moderate risk appetite and leverage.

The stable outlook on Shinhan Investment reflects our expectation its risk appetite, funding and liquidity profiles will not deteriorate further in the coming 12-18 months.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

KB SECURITIES:

KB Securities' ratings could be upgraded if (1) the financial standing of its parent KB FG strengthens as represented by a higher Baseline Credit Assessment (BCA) of Kookmin Bank, or if there is more explicit support from KB FG or the Korean government; or (2) a combination of an improvement in the company's liquidity profile, less volatile profitability, and an increase in its long-term funding, on a sustained basis.

On the other hand, KB Securities' rating could be downgraded if (1) the firm faces material challenges in maintaining stable funding and liquidity profiles; (2) its leverage ratio rises to above 13 times on a sustained basis; (3) its earnings volatility further rises significantly on a sustained basis; or (4) the financial standing of KB FG weakens as represented by a lower BCA of Kookmin Bank, which could lead to a reduction in our assessment of affiliate support.

A lower assessment by Moody's of the operating environment in Korea could also lead to a downgrade of KB Securities' ratings. Any change in regulations that weakens the framework for government support could also result in a downgrade of the firm's ratings.

KOREA INVESTMENT & SECURITIES:

Given the outlook is negative for Korea Investment & Securities, a ratings upgrade is unlikely in the next 12 to 18 months. However the outlook could be changed to stable from negative if regulatory responses are effective in slowing down the risk asset growth and the company maintains sound financial ratios including: (1) stable long-term funding; (2) risk appetite ratio below 25%; (3) leverage ratio below 12 times; and (4) stable profitability.

Its ratings could be downgraded if on a sustained basis: (1) the firm faces material challenges in maintaining a stable funding profile and liquidity; (2) the firms takes higher risks with its risk appetite ratio above 30% and leverage ratio above 13 times; or (4) earnings volatility rises markedly.

A lower assessment by Moody's of the operating environment in Korea could also lead to a downgrade of Korea Investment & Securities' ratings. Any change in regulations that weakens the framework for government support could also result in a downgrade of the firm's ratings.

NH INVESTMENT & SECURITIES:

NH Investment & Securities' ratings could be upgraded if there is a (1) strengthening in the ability of its parent, NH Financial Group to provide support as represented by a higher Baseline Credit Assessment (BCA) of NH Bank; or (2) a combination of an improvement in the company's liquidity profile, reduction in its risk appetite, and an increase in its long-term funding, on a sustained basis.

On the other hand, ratings could be downgraded if (1) the firm faces material challenges in maintaining a stable funding profile and liquidity; (2) its leverage ratio rises to above 13 times on a sustained basis; (3) its risk appetite ratio consistently increases above 35%; or (4) there is a weakening in the financial standing of the company's parent, NH Financial Group, represented by a lower BCA of NH Bank, could lead to a reduction in our assessment of affiliate support, which would, in turn, likely lead to a downgrade of NH Investment &Securities' ratings.

A lower assessment by Moody's of the operating environment in Korea could also lead to a downgrade of NH Investment & Securities' ratings. Any change in regulations that weakens the framework for government support could also result in a downgrade of the firm's ratings.

SAMSUNG SECURITIES:

Samsung Securities' ratings could be upgraded if (1) its funding and liquidity profiles strengthen — for example, through its reduced reliance on short-term funding, increased issuance of long-term debt, or increased credit lines with an improvement in its profitability without a material rise in risk appetite or leverage; or (2) a significant increase in the stake held by its parent, Samsung Life, could lead to an increase in our assessment of affiliate support, which, in turn, could result in an upgrade of Samsung Securities' ratings.

On the other hand, Samsung Securities' ratings could be downgraded if (1) the firm faces material challenges in maintaining a stable funding profile and liquidity; (2) its leverage ratio rises to above 13 times on a sustained basis; (3) its earnings volatility rises significantly on a sustained basis; or (4) a weakening in the financial standing of, or a significant decrease in the stake held by Samsung Securities' parent, Samsung Life, could lead to a reduction in our assessment of affiliate support, which, in turn, could result in a downgrade of Samsung Securities' ratings.

A lower assessment by Moody's of the operating environment in Korea could also lead to a downgrade of Samsung Securities' ratings. Any change in regulations that weakens the framework for government support could also result in a downgrade of the firm's ratings.

SHINHAN INVESTMENT:

Shinhan Investment's ratings could be upgraded if (1) the financial standing of its parent Shinhan FG strengthens as represented by a higher Baseline Credit Assessment (BCA) of Shinhan Bank, or if there is more explicit support from Shinhan FG or the Korean government; or (2) improves its funding profile by securing long-term capital and improves its liquidity.

On the other hand, Shinhan Investment's ratings could be downgraded if (1) the firm faces material challenges in maintaining a stable funding profile and liquidity; (2) its leverage ratio rises to above 13 times on a sustained basis; (3) its risk appetite ratio consistently increases above 30%; or (4) the financial standing of its parent, Shinhan FG, weakens — as represented by the lower Baseline Credit Assessment of Shinhan Bank — because this could lead to a weakening of our assessment of affiliate support.

A lower assessment by Moody's of the operating environment in Korea could also lead to a downgrade of Shinhan Investment's ratings. Any change in regulations that weakens the framework for government support could also result in a downgrade of the firm's ratings.

The principal methodology used in these ratings was Securities Industry Market Makers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187332. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

KB Securities Co., Ltd. is headquartered in Seoul with consolidated assets of KRW53 trillion (USD43 billion) at the end of March 2020.

Korea Investment & Securities Co., Ltd. is headquartered in Seoul with consolidated assets of KRW63 trillion (USD51 billion) at the end of March 2020.

NH Investment & Securities Co., Ltd is headquartered in Seoul with consolidated assets of KRW56 trillion (USD46 billion) at the end of March 2020.

Samsung Securities Co., Ltd. is headquartered in Seoul with consolidated assets of KRW55 trillion (USD45 billion) at the end of March 2020.

Shinhan Investment Corp is headquartered in Seoul with consolidated assets of KRW45 trillion (USD37 billion) at the end of March 2020.

LIST OF AFFECTED RATINGS

KB Securities Co., Ltd. (Lead Analyst: Younghun Kim)

- Confirm long-term and short-term foreign currency issuer rating of A3/P-2

- Outlook changed to stable from ratings under review

Korea Investment & Securities Co., Ltd. (Lead Analyst: Tae Jong Ok)

- Confirm long-term and short-term foreign currency issuer rating of Baa2/P-2

- Outlook changed to negative from ratings under review

NH Investment & Securities Co., Ltd (Lead Analyst: Younghun Kim)

- Confirm long-term and short-term foreign currency issuer rating of Baa1/P-2

- Outlook changed to stable from ratings under review

Samsung Securities Co., Ltd. (Lead Analyst: Younghun Kim)

- Confirm long-term and short-term foreign currency issuer rating of Baa2/P-2

- Outlook changed to stable from ratings under review

Shinhan Investment Corp (Lead Analyst: Younghun Kim)

- Confirm long-term and short-term foreign currency issuer rating of A3/P-2

- Outlook changed to stable from ratings under review

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Moody's considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody's. Unless noted in the Regulatory Disclosures as a Non-Participating Entity, the rated entities are participating and the rated entities or their agent(s) generally provide Moody's with information for the purposes of its ratings process. Please refer to www.moodys.com for the Regulatory Disclosures for each credit rating action under the ratings tab on the issuer/entity page and for details of Moody's Policy for Designating Non-Participating Rated Entities.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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 rating 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.

The first name below is the lead rating analyst for this Credit Rating and the last name below is the person primarily responsible for approving this Credit Rating.

Younghun Kim
Analyst
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Sophia Lee, CFA
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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