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Fitch Downgrades Swedish Banks' Support Ratings
March 3, 2017 / 4:12 PM / 9 months ago

Fitch Downgrades Swedish Banks' Support Ratings

(The following statement was released by the rating agency) LONDON, March 03 (Fitch) Fitch Ratings has downgraded Swedish banks' Support Ratings to '5' from '2' and revised their Support Rating Floors (SRFs) to 'No Floor' from 'BBB-'. The affected banks are Nordea Bank AB, Skandinaviska Enskilda Banken AB, Swedbank AB, Svenska Handelsbanken AB as well as its main subsidiary Stadshypotek. The banks' other ratings are unaffected by this rating action. This rating action follows the publication on 23 February by the Swedish resolution authority, of the banks' minimum requirements for own funds and eligible liabilities (MREL). The requirements introduce a minimum debt component which cannot be met with capital instruments. In Fitch's view, this introduces a sufficient framework for resolving banks that require senior creditors participating in losses, if necessary, instead or ahead of a bank receiving sovereign support. KEY RATING DRIVERS SUPPORT RATING AND SUPPORT RATING FLOOR The Support Ratings of '5' and Support Rating Floors of 'No Floor' reflect Fitch's view that senior creditors can no longer rely on receiving full extraordinary support from the sovereign in the event that any of these banks becomes non-viable. The MREL requirements outlined on 23 February stipulate that a material part must be met by debt instruments that are subordinate to existing senior unsecured liabilities but which remain within the senior debt category, our reference debt class for setting a bank's Issuer Default Ratings (IDRs). Fitch expects banks to issue non-preferred senior notes to meet the MREL requirement, once domestic law permits. The default risk on this new class of non-preferred senior debt would be higher than the risk associated with preferred senior debt and other senior liabilities such as large, wholesale deposits. While Sweden has more flexibility to interpret and apply the EU's Bank Recovery and Resolution Directive (BRRD) than Banking Union member countries, we believe in a resolution scenario the intention of the resolution authority is that senior non-preferred instruments would be bailed in. RATING SENSITIVITIES SUPPORT RATING AND SUPPORT RATING FLOOR An upgrade of the Support Ratings or upward revision of the Support Rating Floors would be contingent on a positive change in the Swedish sovereign's propensity to support its banks, including non-preferred senior notes. While not impossible, this is highly unlikely, in Fitch's view. The rating actions are as follows: Nordea Bank AB Support Rating: downgraded to '5' from '2' Support Rating Floor: revised down to 'No Floor' from 'BBB-' Svenska Handelsbanken Support Rating: downgraded to '5' from '2' Support Rating Floor: revised down to 'No Floor' from 'BBB-' Stadshypotek: Support Rating: downgraded to '5' from '2' Support Rating Floor: revised down to 'No Floor' from 'BBB-' Skandinaviska Enskilda Banken AB Support Rating: downgraded to '5' from '2' Support Rating Floor: revised down to 'No Floor' from 'BBB-' Swedbank AB Support Rating: downgraded to '5' from '2' Support Rating Floor: revised down to 'No Floor' from 'BBB-' Contact: Primary Analyst Bjorn Norrman Senior Director +44 20 3530 1330 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Olivia Perney Guillot Senior Director +33 1 44 299 174 Committee Chairperson Claudia Nelson Senior Director +44 20 3530 1191 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020017 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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