Scope Ratings has today upgraded by one notch the Issuer Credit-Strength Ratings (ICSRs) of 11 banks in six EU/EEA countries: Denmark (Danske Bank), Italy (Intesa, Unicredit), Netherlands (ING Bank, Rabobank), Norway (DNB), Spain (Banco Santander, BBVA), and Sweden (Nordea, Svenska Handelsbanken, Swedbank). The senior unsecured debt ratings of these banks remain unchanged at this time.

The one-notch upgrade of ICSRs is in line with Scope’s current bank rating methodology and addresses the forthcoming adjustment to the creditor hierarchy – in insolvency and/or resolution – related to the introduction of TLAC/MREL-eligible unsecured debt. This specific adjustment aims to harmonise the priority ranking of unsecured debt instruments under national insolvency proceedings and was included in the European Commission’s (EC) November 2016 proposed directive to amend Article 108 of the Bank Resolution and Recovery Directive (BRRD).

Scope highlighted that its rating actions have taken into account the evolving regulatory and legal developments across Europe in a forward-looking manner. According to its methodology, when there is reasonably sufficient visibility about these developments – as is the case with the clarifications provided in the EC’s proposed directive – Scope will notch down the ratings of senior unsecured debt eligible for MREL/TLAC. This occurs via a one-off uplift of one notch of the respective bank’s ICSR (and, if appropriate, of the ratings of senior unsecured liabilities not eligible for MREL/TLAC), reflecting the agency’s opinion that, while the credit fundamentals of the group did not change, going forward the ICSR and the liabilities not eligible for MREL/TLAC should benefit from the protection of a materially more ample capital structure in a default-like situation.

Scope noted that immediately after the publication of its updated bank rating methodology (May 2016), and based on regulatory clarifications at the national level, it upgraded by one notch the ICSRs of German banks, and the ICSRs and the ratings of senior unsecured debt not eligible for TLAC/MREL of banking groups in Belgium and the UK (as well as, outside the EU/EEA, of banking groups in Switzerland), while the ratings of TLAC/MREL-eligible senior unsecured debt were unchanged. A similar rating action was subsequently taken for French banks (December 2016), following the passage of the so-called Sapin II Law which introduced the possibility of issuing a new class of non-preferred senior debt eligible for TLAC/MREL.

In its proposed amendment to Article 108 of the BRRD, the EC stated that “the new provision keeps the existing class of senior debt while it creates a new asset class of ‘non-preferred’ senior debt that should only be bailed-in in resolution after other capital instruments, but before other senior liabilities”. Scope views the EC-proposed directive, which it expects will be adopted by the European Parliament and the Council, as providing sufficient clarity with respect to the future creditor hierarchy for EU/EEA banks – thus justifying the one-notch ICSR upgrade.

While going forward Scope expects EU/EEA banks to adopt the route of non-preferred senior debt issuance, as proposed by the EC, it considers that, for the banks in the six EU/EEA countries for which it is upgrading the ICSRs, there is still insufficient clarity (Italy, Spain) or very little clarity (Denmark, Netherlands, Norway, Sweden) regarding the seniority ranking of existing senior unsecured debt. Consequently, Scope added that at this time their senior debt ratings remain unchanged. When the final eligibility of existing senior unsecured debt for TLAC/MREL, following national implementation of the EC proposal, is clarified, Scope will adjust ratings accordingly – either through a one-notch upgrade for senior debt not eligible for MREL/TLAC or by maintaining existing ratings for senior debt eligible for MREL/TLAC. The agency expects these adjustments to be completed by June 2017 – when the EC-proposed directive will have to be transposed by EU member states, to be applied from July 2017.

Scope added that it also plans to rate the forthcoming non-preferred senior unsecured debt of these banks once they start being issued.

This morning Scope is also publishing a brief Q&A report with more details on the analytical rationale for the rating adjustments. The report is titled 'Brief Background on TLAC/MREL-Related Rating Adjustments for European Banks' and can be accessed at www.scoperatings.com.

The following Issuer Credit-Strength Ratings (ICSRs) have been upgraded by one notch:

Denmark:

• Danske Bank: A from A-, Positive Outlook

Italy:

• Intesa Sanpaolo: A from A-, Stable Outlook
• Unicredit: A- from BBB+, Stable Outlook

Netherlands:

• ING Bank: A+ from A, Positive Outlook
• Coöperatieve Rabobank: AA- from A+, Stable Outlook

Norway:

• DNB Bank: AA- from A+, Stable Outlook

Spain:

• Banco Santander: AA- from A+, Stable Outlook
• BBVA: A+ from A, Stable Outlook

Sweden:

• Nordea Bank: AA- from A+, Stable Outlook
• Svenska Handelsbanken: A+ from A, Stable Outlook
• Swedbank: A from A-, Stable Outlook

All other ratings and rating outlooks of these banks remain unchanged.

Legal and regulatory disclosures

Information pursuant to Regulation (EC) No 1060/2009 on credit rating agencies, as amended by Regulations (EU) No. 513/2011 and (EU) No. 462/2013

Responsibility
This report is issued by Scope Ratings AG, Berlin, District Court for Berlin (Charlottenburg) HRB 161306 B, Executive Board: Torsten Hinrichs (CEO), Dr Stefan Bund and Dr Sven Janssen.
The Lead Analyst for DNB Bank ASA is Pauline Lambert, Executive Director.
The Lead Analyst for ING Bank NV and Cooperatieve Rabobank U.A. is Chiara Romano, Analyst.
The Lead Analyst for Danske Bank A/S, Intesa Sanpaolo SPA, Unicredit SPA, Banco Santander SA, BBVA SA, Nordea Bank AB, Svenska Handelsbanken AB and Swedbank AB is Marco Troiano, Director.
Responsible for approving all rating actions: Sam Theodore, Managing Director.

Rating history
The rating history for each issuer and senior unsecured debt is available on the individual public rating cards. Please follow he links below:
Danske Bank • Intesa Sanpaolo • Unicredit • ING Bank • Cooperatieve Rabobank • DNB Bank • Banco Santander • BBVA • Nordea Bank • Svenska • Swedbank 

The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months. A rating change is, however, not automatically ensured.

The ratings for Unicredit SPA, ING Bank NV and Swedbank AB were not requested by the issuers (unsolicited rating) and were prepared without participation of the issuers.

The ratings for Cooperatieve Rabobank U.A., Danske Bank A/S, Intesa Sanpaolo SPA, Banco Santander SA, BBVA SA, Nordea Bank AB, DNB Bank ASA and Svenska Handelsbanken AB were not requested by the issuers (unsolicited rating) but with participation of the issuers.

*The press release was amended on 02/02/2017 to reflect that while the rating of DNB Bank is unsolicited they have participated in the rating process.

Dr. Martha Böckenfeld, the chair of the supervisory board of Scope Ratings AG is at the same time a member of the UniCredit Board of Directors as an independent non-executive Director.

Key sources of information for the rating
Website of the rated entity/issuer | Annual reports/semi-annual reports of the rated entity/issuer | performance records | Annual financial statements | Data provided by external data providers | External market reports | Press reports | other public information
Scope Ratings considers the quality of the available information on the evaluated company to be satisfactory. Scope uses information and data that it considers to be accurate and reliable. Scope cannot, however, independently verify the reliability and accuracy of such information and data.

Examination of the rating by the rated entity prior to publication
Prior to publication, the rated entities were given the opportunity to examine the rating and the rating drivers, including the principal grounds on which the credit rating or rating outlook is based. The rated entity was subsequently provided with at least one full working day, to point out any factual errors, or to appeal the rating decision and deliver additional material information. Following that examination, the ratings were not modified.

Methodology
The methodologies applicable for this rating actions “Bank Rating Methodology” (May 2016) is available on www.scoperatings.com. The historical default rates of Scope Ratings can be viewed on the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s default rating, definitions of rating notations and further information on the analysis components of a rating can be found on www.scoperatings.com.

Conditions of use / exclusion of liability
© 2017 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings AG, Scope Analysis, Scope Investor Services GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope cannot, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided “as is” without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or otherwise damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party, as opinions on relative credit risk and not as a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings AG at Lennéstraße 5 D-10785 Berlin.

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