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Fitch Rates Credit Bank of Moscow's Subordinated Eurobonds 'BB-(EXP)'
November 20, 2014 / 4:43 PM / in 3 years

Fitch Rates Credit Bank of Moscow's Subordinated Eurobonds 'BB-(EXP)'

(The following statement was released by the rating agency) MOSCOW/LONDON, November 20 (Fitch) Fitch Ratings has assigned Credit Bank of Moscow's (CBOM; BB/Stable/bb) upcoming subordinated eurobond issue with write-off features a 'BB-(EXP)' expected rating. The final rating is contingent upon the receipt of final documents conforming materially to information already received. KEY RATING DRIVERS CBOM's "new style" Tier 2 subordinated debt issue has been rated one notch lower than the bank's Viability Rating (VR). This includes (i) zero notches for additional non-performance risk relative to the VR, as Fitch believes these instruments should only absorb losses once a bank reaches, or is very close to, the point of non-viability (PONV); and (ii) one notch for loss severity reflecting below average recoveries in case of default. The bonds will have a principal and coupon write-down feature (pro rata with other loss absorbing instruments) triggered in case (i) core Tier 1 capital adequacy ratio decreases below 2%; or (ii) the Deposit Insurance Agency directly or indirectly acquires a controlling stake in the bank and/or provides financial assistance to it as part of an approved bankruptcy prevention plan. Although legally the latter is possible as soon as a bank breaches any of its mandatory capital ratios or is in breach of certain other liquidity and capital requirements, Fitch's base case assumption is that the regulator will not trigger loss absorption until a bank has reached (or is very likely to reach) PONV. The 'new-style' subordinated Eurobond will be issued by an Ireland-based special purpose vehicle, CBOM Finance PLC, which will on-lend the issue's proceeds to CBOM under a subordinated loan agreement. For the most recent update on CBOM's credit profile see "Fitch Downgrades Promsvyazbank; Affirms 4 Other Russian Private Banks" dated 7 November 2014 on www.fitchratings.com. RATING SENSITIVITIES The issue rating is linked to the bank's VR, and would therefore likely be upgraded or downgraded following similar action on the VR. Downside pressure on CBOM's ratings could arise if there is a greater-than-expected deterioration in asset quality materially eroding CBOM's loss absorption capacity. Upside potential for CBOM's ratings is unlikely in the near term as Russian economy is now on the negative side of the credit cycle, which may affect the sector liquidity and/or asset quality in a negative manner. CBOM's other ratings, which are unaffected, are as follows: Long-term foreign and local currency IDRs: 'BB', Outlooks Stable Short-term foreign currency IDR: 'B' Viability Rating: 'bb' Support Rating: '5' Support Rating Floor: 'No Floor' National Long-term rating: 'AA-(rus)'; Outlook Stable Senior unsecured debt: 'BB'/'AA-(rus)' and 'BB(EXP)'/'AA-(EXP)(rus)' Subordinated debt (issued by CBOM Finance PLC (Ireland)): 'BB-' Contacts: Primary Analyst Dmitri Vasiliev Director +7 495 956 5576 Fitch Ratings Moscow Valovaya Str, 26 Moscow Secondary Analyst Alexander Danilov Senior Director +7 495 956 9901 Committee Chairperson James Watson Managing Director +7 495 956 9901 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, Global Financial Institutions Rating Criteria dated 31 January 2014 are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status 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 WEBSITE '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.

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