PrefBlog

Standard & Poor’s has announced:

• •We now consider the prospect that the U.K. and German governments would provide extraordinary support to their banking systems to be uncertain, meaning that we now include no such uplift in the ratings on systemic commercial banking groups domiciled in these countries.
• •However, we recognize that these countries’ bank resolution frameworks are now well advanced, and we now include notches of uplift for systemic banks that we expect will hold or build sizeable volumes of bail-in capital in the coming years.
• •At the same time, we have recognized the strengthening intrinsic creditworthiness of a few banks that have, for example, materially strengthened their capitalization and lowered their exposure to unexpected losses.
• •We have resolved the CreditWatch placements on all these banks, lowering the long-term, and in some cases short-term, ratings on some, and affirming the ratings on others.
• •The outlook on most of these banks is now stable, but we have assigned negative outlooks where, for example, we see a risk that their building of core or bail-in capital may fall short.
• •Finally, we maintain the developing outlook on Germany-based Deutsche Pfandbriefbank AG (PBB), reflecting our view that the outcome of its reprivatization process is still uncertain.

…
•We affirmed our ratings on the hybrid capital instruments issued by, or guaranteed by, HSBC, Santander UK, and SCB, but raised by one notch the issue credit ratings on hybrids issued by Lloyds (and its banking affiliates) and Nationwide. We also raised by one notch the long-term issuer credit ratings on Lloyds Banking Group PLC and HBOS PLC.
…
However, to summarise, these actions reflect our view that these countries’ implementation of the comprehensive resolution framework set out in the EU’s Bank Recovery & Resolution Directive, including bail-in powers and requirements, mean that the prospect for extraordinary government support now appears uncertain, even for systemically important bank operating companies, and even while these banks remain in a transitional phase of building buffers of loss-absorbing debt instruments. However, we expect that regulators will (in most cases) require these banks within the next few years to build those buffers to a level that offers a material level of protection to senior unsecured creditors on a nonviability (or “gone concern”) basis.

For two reasons, our review primarily focused on the implications of the above for the issuer credit ratings on these banks’ operating companies and the issue credit ratings on their senior unsecured debt issue instruments:

• •Our ratings on European banks’ subordinated debt instruments and U.K. bank holding companies already excluded any uplift for government
  support; and

• •We saw no prospect of uplift under our additional loss absorbing capacity (ALAC) criteria for the instruments cited in the bullet above because regulators intend them to act as a source of bail-in capital to support the systemic functions provided by bank operating companies, including the servicing of certain senior obligations.

The now-resolved Credit-Watch-Negative on HSBC was reported in February.

This entry was posted on Tuesday, June 9th, 2015 at 9:07 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.