DBRS Places BMPS Ratings Under Review with Negative Implications

DBRS Ratings Limited (DBRS) has today placed its ratings for Monte dei Paschi di Siena SpA (BMPS or the Bank) Under Review with Negative Implications. These ratings include the Senior Long-Term Debt and Deposit Rating of BBB, as well as the Short Term Debt and Deposit Rating of R-2 (middle). As part of the review process, the Intrinsic Assessment (IA) of BBB (low) will also be reviewed.

The rating action follows the October 26, 2014 result of the ECB Comprehensive Assessment which identified a EUR 2.1 billion capital shortfall for BMPS in the adverse scenario stress test. Although the Bank has successfully achieved some of the key restructuring goals as agreed with the EU in 2013 and also met the minimum capital requirements under the AQR and Baseline scenario stress tests, the capital buffer was insufficient to cover the additional requirements as defined under the adverse scenario which is based on forward looking hypothetical assumptions. As such, BMPS is required to submit a remediation plan which will outline the Bank’s plan to bridge the capital shortfall within a period of nine months.

During the review period, DBRS will evaluate the Bank’s remediation plan, its feasibility and the timeframe for its completion. In parallel, DBRS will also consider any potential implications for BMPS’ restructuring plan, as well as the overall impact of these actions on the Bank’s franchise. A swift and complete resolution of the capital shortfall could support the confirmation of the existing ratings. However, should BMPS have difficulty in complying with the ECB requirements, or should its restructuring plan or franchise strength be weakened, this could lead to negative implications for the IA and final rating.

DBRS rating reviews are typically expected to be resolved within a three month period.

Notes:
All figures are in euros unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (June 2014). Other applicable methodologies include the DBRS Criteria: Support Assessment for Banks and Banking Organisations (January 2014) and DBRS Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (December 2013).These can be found can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include company reports, ECB reports 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.

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

Lead Analyst: Peter Burbank
Rating Committee Chair: Alan G. Reid
Initial Rating Date: January 18, 2013
Most Recent Rating Update: July 3, 2014

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

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.