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Fitch Releases Updated Bank Ratings Study
September 29, 2016 / 1:17 PM / a year ago

Fitch Releases Updated Bank Ratings Study

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Global Bank Rating Performance Study: Update 2015 here LONDON, September 29 (Fitch) Fitch Ratings has released an update of its bank ratings performance study, previously known as the "Bank Failure Study". The report, "Global Bank Rating Performance Study: Update 2015", complements Fitch's published Issuer Default Rating-centric transition and default studies, and examines the performance of the bank rating framework and its component ratings - the Viability Rating (VR) and its predecessor Individual Rating, as well as Support Ratings and Support Rating Floors. The end-2015 study, in conjunction with the 1990-2012 study provides data and analysis on bank failures, defaults and rating transitions over a 26-year time horizon. Bank failures have been correlated to financial crises with notable peaks through the 1990s and in the financial crisis of the late 2000s. The 2008-2009 peak represented a crisis that was truly global and, for the first time, included failures of large, highly rated banking groups. Failures in recent years were heavily weighted towards developed economies, with the eurozone crisis accounting for a significant number. From 2012 to 2015, a total of 35 Fitch-rated banks failed, representing an average one-year failure rate of 1.06%. This compares with a long-run one-year average failure rate of 1.6% over the 26 years covered by Fitch's rating performance studies. Excluding movements to "failed" status, VR transitions to a rating more than one category from that at the start of the year were less than 1% in all 'b' and above categories. The vast majority of "failed" banks between 2012 and 2015 had "sub-investment-grade" VRs at the end of the year prior to the year of failure, and 27 of the 35 were rated in 'b' or below categories. Bank failure rates remain between five and six times higher than bank defaults. The difference between failure and default is support. One-year bank default rates remain significantly lower than corporate default rates at 0.3% compared with 0.7%. Fitch expects to see the failure and default "gap" close as resolution regimes become more commonplace and regulators position their banking systems to become less reliant on state support. Based on one-year cohorts over the 26 years covered by this study, defaults by banks with investment-grade equivalent Support Ratings remain extremely low with only four events, representing 0.05% of investment-grade observations. The full report "Global Bank Rating Performance Study: Update 2015" is available at Contact: Gordon Scott Managing Director +44 20 7530 1075 Fitch Ratings Limited 30 North Colonnade London E14 5GN Will Knight Senior Director +44 20 7530 1044 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Additional information is available on Applicable Criteria Global Bank Rating Criteria (pub. 15 Jul 2016) here Related Research Global Bank Rating Performance Study: 1990-2012 here Global Bank Rating Trends 1H16 here Global Corporate Finance 2015 Transition and Default Study 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. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. 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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