Scope Ratings today has assigned long-term ratings of A+ with Negative outlook and a short-term rating of S-1 with Stable outlook to Credit Suisse Group AG, which is the holding company of Credit Suisse AG. Scope already rates Credit Suisse AG at A+ with Negative outlook and S-1 with Stable outlook. In rating the holding company at the same level as the operating bank, Scope pointed to the highly integrated structure of the Credit Suisse Group, financially, operationally and strategically.

In its bank rating methodology published earlier this year Scope noted that it may potentially rate a banking group’s holding company at the same level as it would rate the main operating bank. This would be the case as long as there are no grounds to estimate that, in a stress scenario, the creditors of the holding company would be treated differently from the creditors of the operating bank. With respect to the Credit Suisse group, Scope added that future debt issuance by the holding company rather than by the operating bank will aim to create greater transparency and clarity in resolution, as requested by FINMA (the Swiss financial regulatory authority), and not to lead to a different treatment between holders of debt with the same seniority at the holding company and the operating bank level.

To support its rating action and explain the analytical rationale behind it Scope has published a detailed report on Credit Suisse Group AG, which supplements its earlier issuer report on Credit Suisse AG. In it, the rating agency notes that in the very improbable event of a resolution of a large Swiss bank, FINMA has made its preference clear for the concept of Single Point of Entry (SPE). Under this structure “creditors of the parent bank or top-level holding company bear a share of the losses, allowing the entire financial group to be recapitalized. This recapitalization must be sufficient to meet the needs of all group companies in Switzerland and abroad” highlighted FINMA’s in its August 2013 position paper on the resolution of systematically important banks.

Scope believes that under SPE Credit Suisse Group AG will play an increasingly important part in the loss absorption capability of the group as a whole. The holding company has already raised or explicitly guaranteed more than CHF 7.5bn of loss-absorbing capital instruments (versus CHF 3.75bn only for the bank). Added Jacques-Henri Gaulard, Scope’s lead analyst for Credit Suisse’s ratings: “We estimate that as Credit Suisse AG’s senior debt matures the replacing debt will be issued at holding company level. By the end of the transition period in 2019 most of the group’s senior unsecured debt should be housed in Credit Suisse Group AG rather than in Credit Suisse AG.”

The following ratings were assigned:

• Issuer Credit-Strength Rating (ICSR) at A+, with Negative outlook. The ICSR represents a credit opinion on a bank’s ability to meet its contractual financial commitments on a timely basis and in full while remaining a going concern.
• Senior unsecured debt rating at A+, with Negative outlook.
• Short-term debt rating of S-1, with Stable outlook.

Scope noted that the Negative outlook for the A+ short-term ratings takes account of the potentially negative impact on some of Credit Suisse’s activities of its recent guilty plea in the US. The agency nevertheless expects the group’s financial and business fundamentals to remain stable and reliable and its integration strategy to be pursued successfully.

In the near future Scope will rate Credit Suisse Group AG’s subordinated securities and capital instruments.

The ratings assigned to Credit Suisse Group AG are (i) based on public information, (ii) not solicited by the issuer and (iii) with issuer participation in the process.

The methodology used for the rating assignment is “Bank Rating Methodology” published in February 2014. The methodology used for the financial-forecast part of the rating analysis is “Forecasting Bank Financials” published in February 2014. These methodologies are available on www.scoperatings.com.