DBRS Places Certain Subordinated Debt of 23 European Banks Under Review With Negative Implications

DBRS, Inc. and DBRS Ratings Limited (collectively, DBRS) has today placed Under Review with Negative Implications the ratings of certain subordinated and hybrid debt of 23 European financial institutions. This rating action reflects the developments that have been taking place in the position of subordinated and hybrid bond holders of European banks that come under financial stress. Rating downgrades are, in most cases, expected to be limited to one notch.

In DBRS’s view, even though the necessary legislation is still to be implemented in some countries, the European Commission’s (EC’s) updated State Aid rules of September 2013, together with the finalisation of the European Bank Recovery and Resolution Directive (European BRRD) in April 2014 provide the framework needed for regulators in Europe to treat subordinated and hybrid debt holders as a source of capital in a failing bank and in a way that differs from the treatment of senior debt. Consequently, DBRS will review whether to notch these instruments from the bank’s Intrinsic Assessment (IA), rather than from the senior debt rating, which may incorporate systemic support.

DBRS has notched subordinated and hybrid debt from senior unsecured debt in jurisdictions where the authorities have limited abilities to impose losses on subordinated debt and hybrid holders in the absence of putting a bank into receivership. This approach is explained in DBRS’ criteria “Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities” published in December 2013. However, under this methodology, where governments are disposed towards imposing losses on subordinated debt and hybrid holders at a bank under stress, DBRS’s approach is to notch from the bank’s Intrinsic Assessment (IA), which does not include any systemic support that may be incorporated into the senior unsecured debt rating. DBRS already notches any subordinated debt that converts to preferred shares from the IA to reflect the weaker position of such obligations at a bank under stress. Due to the specific characteristics of the instruments DBRS also notches subordinated debt from the IA in certain jurisdictions such as Norway and Denmark.

DBRS will review the current subordinated debt and hybrid ratings that are notched from the senior rating at European financial institutions during a review period that is likely to take no longer than 90 days. DBRS currently rates subordinated debt either one notch (for mandatory pay or discretionary pay but cumulative instruments) or two notches (for discretionary pay, non-cumulative instruments) below senior unsecured debt. As DBRS has typically incorporated up to one notch (or, in a small number of cases, two notches) of systemic support into the senior unsecured debt ratings of the affected banks, the change to notching from the IA instead of from the senior unsecured debt rating, is likely to lead to a lowering of the subordinated debt and hybrid ratings by one notch. In some cases, where the IA is already at the same level as the senior unsecured debt rating, a change in approach may not lead to any rating change. However, the final conclusion will take into account the characteristics of the instruments and the impact of the overall resolution framework.

DBRS has also included Swiss banks in its review, as a similar direction is evident in the evolution of the treatment of subordinated debt holders in Switzerland.

DBRS notes that the European BRRD sets the broader framework for the resolution of banks in Europe and is to be implemented from January 2016. The Directive includes a capability to “bail-in” certain liabilities of failing banks to minimise a distressed bank’s reliance on extraordinary public financial support. Taken in isolation, such capabilities also have negative implications for senior bondholders. However, within the broader context of the increased constraints on banks’ risk taking, higher capital requirements, increased liquidity requirements, and an environment of enhanced regulation including the creation of a single European bank regulator, DBRS considers the overall impact on banks’ senior debt is still evolving. Moreover, given the work that is still required to implement the Directive, including its introduction into national legislation, DBRS does not expect to incorporate the impact into the senior debt ratings of European banks until there is greater clarity.

Notes:
The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations. Other methodologies used include the following: DBRS Criteria: Support Assessment for Banks and Banking Organisations and DBRS Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities. These can be found on the DBRS website under Methodologies.

The sources of information used for this rating include company reports, Bloomberg and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a twelve month period. DBRS’s outlooks and ratings are under regular surveillance.

This rating is under review. Generally, the conditions that lead to the assignment of reviews are resolved within a 90 day period. DBRS reviews and ratings are under regular surveillance.

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.

Belfius Bank SA/NV:

Lead Analyst: Roger Lister
Rating Committee Chair: Alan G. Reid
Initial Rating Date: December 5, 2007
Most Recent Rating Update: January 30, 2014

DBRS, Inc. 140 Broadway, 35th Floor New York,
NY 10005 United States of America

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.

DZ BANK AG Deutsche Zentral-Genossenschaftsbank:

Lead Analyst: Peter Burbank
Rating Committee Chair: Alan G. Reid
Initial Rating Date: May 22, 2007
Most Recent Rating Update: February 11, 2014

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.

Deutsche Pfandbriefbank AG:

Lead Analyst: Peter Burbank
Rating Committee Chair: Alan G. Reid
Initial Rating Date: July 19, 2006
Most Recent Rating Update: May 6, 2014

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.

Landesbank Berlin AG:

Lead Analyst: Peter Burbank
Rating Committee Chair: Alan G. Reid
Initial Rating Date: January 22, 2007
Most Recent Rating Update: October 25, 2013

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Intesa Sanpaolo SpA:

Lead Analyst: Peter Burbank
Rating Committee Chair: Alan G. Reid
Initial Rating Date: September 19, 2013
Most Recent Rating Update: September 19, 2013

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

ABN AMRO Group N.V.:

Lead Analyst: Ross Abercromby
Rating Committee Chair: Alan G. Reid
Initial Rating Date: June 25, 2010
Most Recent Rating Update: October 18, 2013

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Banco Espírito Santo, S.A.:

Lead Analyst: Rui Croca
Rating Committee Chair: Alan G. Reid
Initial Rating Date: April 19, 2011
Most Recent Rating Update: April 30, 2014

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Banco Comercial Português, S.A.:

Lead Analyst: Rui Croca
Rating Committee Chair: Alan G. Reid
Initial Rating Date: June 10, 2011
Most Recent Rating Update: June 28, 2013

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Caixa Económica Montepio Geral:

Lead Analyst: Rui Croca
Rating Committee Chair: Alan G. Reid
Initial Rating Date: June 27, 2011
Most Recent Rating Update: June 27, 2013

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Caixa Geral de Depósitos, S.A.:

Lead Analyst: Rui Croca
Rating Committee Chair: Alan G. Reid
Initial Rating Date: December 23, 2011
Most Recent Rating Update: June 28, 2013

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Espírito Santo Financial Group, S.A.

Lead Analyst: Rui Croca
Rating Committee Chair: Alan G. Reid
Initial Rating Date: April 20, 2011
Most Recent Rating Update: May 7, 2013

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Banco Bilbao Vizcaya Argentaria, S.A.:

Lead Analyst: Rui Croca
Rating Committee Chair: Alan G. Reid
Initial Rating Date: November 23, 2009
Most Recent Rating Update: April 4, 2014

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Banco Popular Español S.A.:

Lead Analyst: Rui Croca
Rating Committee Chair: Alan G. Reid
Initial Rating Date: September 21, 2006
Most Recent Rating Update: July 31, 2013

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Banco Santander SA:

Lead Analyst: Rui Croca
Rating Committee Chair: Alan G. Reid
Initial Rating Date: October 11, 2006
Most Recent Rating Update: August 29, 2013

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.

Credit Suisse Group AG:

Lead Analyst: Lisa Kwasnowski
Rating Committee Chair: Alan G. Reid
Initial Rating Date: July 16, 2001
Most Recent Rating Update: December 19, 2013

DBRS, Inc. 140 Broadway, 35th Floor New York,
NY 10005 United States of America

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.

Skandinaviska Enskilda Banken AB:

Lead Analyst: Ross Abercromby
Rating Committee Chair: Alan G. Reid
Initial Rating Date: December 14, 2006
Most Recent Rating Update: January 8, 2014

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.

Nordea Bank AB:

Lead Analyst: Ross Abercromby
Rating Committee Chair: Alan G. Reid
Initial Rating Date: November 28, 2006
Most Recent Rating Update: February 20, 2014

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.

Svenska Handelsbanken AB:

Lead Analyst: Ross Abercromby
Rating Committee Chair: Alan G. Reid
Initial Rating Date: December 7, 2009
Most Recent Rating Update: March 21, 2014

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.

Swedbank AB:

Lead Analyst: Ross Abercromby
Rating Committee Chair: Alan G. Reid
Initial Rating Date: December 18, 2009
Most Recent Rating Update: January 8, 2014

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Royal Bank of Scotland Group plc, The:

Lead Analyst: Elisabeth Rudman
Rating Committee Chair: Alan G. Reid
Initial Rating Date: October 27, 2004
Most Recent Rating Update: March 5, 2014

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Barclays Bank PLC:

Lead Analyst: Elisabeth Rudman
Rating Committee Chair: Alan G. Reid
Initial Rating Date: September 9, 2005
Most Recent Rating Update: September 9, 2013

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Lloyds Banking Group plc:

Lead Analyst: Elisabeth Rudman
Rating Committee Chair: Alan G. Reid
Initial Rating Date: January 19, 2009
Most Recent Rating Update: March 21, 2013

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.

Nationwide Building Society:

Lead Analyst: Ross Abercromby
Rating Committee Chair: Alan G. Reid
Initial Rating Date: December 9, 1998
Most Recent Rating Update: September 12, 2013

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

For additional information on this rating, please refer to the linking document located at: http://www.dbrs.com/research/236983/banks-and-banking-organisations-linking-document.pdf

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.