DBRS Places Long-Term Senior Debt of 6 German Banking Groups Under Review With Negative Implications

DBRS Ratings Limited and DBRS, Inc. (collectively, DBRS) has placed Under Review with Negative Implications the Long-Term Senior Debt ratings of 6 German banking groups (the Banks).

The rating action is in response to ongoing legislative changes in Germany, including the most recent planned change to harmonise the liability structure of German banks more closely with other European jurisdictions. Specifically, the amendment of Section 46f of the German Banking Act (KWG), which is expected to take effect by end-July 2018, will allow for the issuance of both lower ranking “Senior Non-Preferred Debt” as well as higher ranking “Preferred Senior Debt”.

DBRS has placed Under Review with Negative Implications the ratings of the Banks’ existing Senior Debt, which are currently positioned at the same level as the Intrinsic Assessment (IA) (or at the Floor Rating of the Sparkassen-Finanzgruppe for its members) in order to review outstanding ratings of debt instruments. The new class of Senior Non-Preferred Debt will rank alongside the existing Senior Debt instruments, and as DBRS rates Senior Non-Preferred Debt at 1 notch below the IA in other European jurisdictions, DBRS will be reviewing the ratings of existing Senior Debt instruments. At the conclusion of the review, DBRS expects to assign a new Senior Debt Rating, which will refer to the higher ranking Preferred Senior Debt instruments.

Under the German Resolution Mechanism Act (AbwMechG) Germany lowered the ranking of Banks’ tradeable senior debt through statute as of January 2017 in order to meet TLAC and MREL requirements for loss-absorbing debt. DBRS did not change its ratings of the German Banks’ Senior Debt at that time because the outstanding senior unsecured tradeable debt remained the main class of Senior Debt, with a relatively small proportion of higher ranking Preferred Senior Debt (which included harder to bail-in instruments, such as structured notes and short-term money-market instruments). However, with the planned designation of the new classes of Preferred Debt and Senior Non-Preferred Debt, DBRS expects Preferred Senior Debt issuance to become a key funding source over time.

DBRS expects to have a short review period which it aims to conclude by the end of July, or when the legislation is finalised. Potential rating downgrades are expected to be limited to one notch. The ratings of the individual Sparkassen are not included in this review, as DBRS does not rate their individual debt instruments.

RATING DRIVERS
The ratings are Under Review with Negative Implications as discussed above.

Notes:
All figures are in EUR unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (May 2017). This can be found can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include company reports, the European Commission and SNL Financial. 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.

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.

These ratings are 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 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 and US regulations only.

Deutsche Bank AG
Lead Analyst: Lisa Kwasnowski, Senior Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: February 25, 2015
Most Recent Rating Update: May 9, 2018

Deutsche Pfandbriefbank AG
Lead Analyst: George Yiannakis, Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: July 19, 2006
Most Recent Rating Update: June 25, 2018

DZ BANK AG Deutsche Zentral-Genossenschaftsbank
Lead Analyst: George Yiannakis, Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: May 22, 2007
Most Recent Rating Update: June 1, 2018
This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.
This rating included participation by the rated entity or any related third party. DBRS had no access to relevant internal documents for the rated entity or a related third party.

Sparkassen-Finanzgruppe
Lead Analyst: George Yiannakis, Vice President, Global Financial Institutions Group
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: January 18, 2007
Most Recent Rating Update: March 27, 2018

Landesbank Berlin AG
Lead Analyst: George Yiannakis, Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: January 22, 2007
Most Recent Rating Update: April 17, 2018

Norddeutsche Landesbank
Lead Analyst: George Yiannakis, Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: June 11, 2018
Most Recent Rating Update: June 11, 2018

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