Press Release
DBRS Concludes Review of European Sub Debt – 28 Banking Groups Affected
Banking OrganizationsDBRS Ratings Limited and DBRS, Inc. (collectively, DBRS) has today downgraded by one notch the ratings of certain subordinated debt of 27 European banking groups. In addition, the subordinated debt ratings of one bank, whose subordinated debt was Under Review with Positive Implications, were confirmed. The rating action affects only the higher rated subordinated debt in European banks’ capital structure, and reflects the increasing likelihood that holders of this debt are now likely to bear losses at the same time as lower rated subordinated debt of banks that come under financial stress.
The ratings were placed under review on January 13 and the review was extended on March 29 following the publication of the Request for Comment on the Global Banking Methodology. The updated Global Banking Methodology was published on May 24, 2017. Today’s action concludes the review.
DBRS previously rated dated subordinated debt and cumulative junior subordinated debt of European banks one notch below the Intrinsic Assessment (IA), while non-cumulative junior subordinated debt was rated two notches below the IA. However, given the increasing likelihood that all subordinated debt will be used to absorb losses alongside equity in Europe (under the European Union’s Bank Recovery and Resolution Directive (BRRD) or similar provisions in non-EU countries), DBRS has downgraded the subordinated debt that was rated only 1 notch below the IA to the same level as existing non-cumulative junior debt (i.e. 2 notches below the IA).
The rating action is in line with the Debt Obligations Framework set out in DBRS’s updated Global Banking Methodology (May 2017). There has been no rating action taken on rated subordinated debt in the USA, Canada or Asia-Pacific, given the different regulatory regimes in these countries.
The confirmation of the BBB ratings on The Governor and Company of the Bank of Ireland’s Dated Subordinated Debt reflects that following the recent upgrade of the IA to A (low) the Dated Subordinated Debt is already rated two notches below the IA.
RATING DRIVERS
The ratings of subordinated debt will now move in line with the Intrinsic Assessments of the individual banks.
Notes:
All figures are in Euros unless otherwise noted.
The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (May 2017) and DBRS Criteria: Guarantees and Other Forms of Support (February 2017). These can be found can be found at: http://www.dbrs.com/about/methodologies
The sources of information used for this rating include the European Commission, SNL Financial and company disclosures. DBRS considers the information available to it for the purposes of providing this rating to be 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.
For further information on DBRS historical default rates published by the European Securities and Markets Authority (“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.
For full rating committee disclosures see: <a href="http://www.dbrs.com/research/311714" target="blank">
Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.
Ratings
ABN AMRO Bank N.V.
BCP Finance Bank, Ltd.
BCP Macao Branch
BNP Paribas SA
Banca Sella S.p.A.
Banco BPM SpA
Banco Bilbao Vizcaya Argentaria, S.A.
Banco Comercial Português, S.A.
Banco Santander SA
Banco de Sabadell, S.A.
Bank of Scotland plc
Barclays Bank PLC
Belfius Bank SA/NV
CGD France Branch
Caixa Economica Montepio Geral
Caixa Geral de Depósitos Finance
Caixa Geral de Depósitos, S.A.
CaixaBank, S.A.
Credit Suisse (USA), Inc.
Credit Suisse AG
ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.
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Contacts
William Schwartz
Associate Credit Rating Officer - Global Fundamental Ratings, Credit Practices
+(1) 212 806 3233
william.schwartz@morningstar.com