Scope Ratings has today upgraded the short-term ratings of 20 European banks, to S-1+ (the highest on Scope’s rating scale) from S-1, and to S-1 from S-2. A full list of the banks and the ratings can be found below. In line with this rating action, the agency has also upgraded by one notch these banks’ outstanding commercial paper programmes (which were already carrying a Scope rating). All upgraded short-term ratings have a Stable Outlook.

Scope’s short-term bank ratings apply to debt with a maturity of 13 months or less, as well as to other short-term financial commitments. Much of this debt is being issued on a rolling basis, therefore Scope’s short-term ratings express a credit opinion on the issuing bank’s capacity to preserve unimpeded its debt-rolling ability, which is based to no small extent on investors’ and other market participants’ view of its timely debt-repayment capacity.

Bank supervisors’ enhanced focus on liquidity

Scope said that on an average-sector basis banks display materially ampler liquidity metrics than non-financial corporations, due to bank-specific regulatory requirements and market expectations, as well as to the banks’ inherent role of creating liquidity in the market as part of their activities (payments, intermediation, financial transactions, etc.). That said the financial crisis which started ten years ago revealed the Achilles’ heel of banks, showing how a sharp negative turn in market sentiment can harm the quality and marketability of liquid assets and evaporate short-term market funding sources.

In the years since then, bank regulators in Europe and elsewhere have substantially revisited and enhanced their rules and supervision related to liquidity and funding. These steps include materially stricter parameters for the level and composition of liquid assets for banks, regulatory ratios specifically applicable to liquidity and funding -- Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NFSR) – and, importantly, a supervisory process targeting liquidity as a core prudential risk for banks. In the European Union, for example, one of the four pillars of the Supervisory Review and Examination Process (SREP) focuses on liquidity and its management.

Scope expects euro area, UK, Nordic and Swiss bank supervisors alike to continue their enhanced focus on making sure the institutions they supervise – notably those of systemic importance -- remain amply and predictably liquid. At the same time, the rating agency highlighted that, more recently, European resolution authorities as well have also pointed out to the need to ensure liquidity and funding predictability for banking groups going into resolution.

Spurred by regulatory demands and heightened market expectations, banking institutions have boosted the level, quality and management of their liquidity. In this respect, Scope noted that all banks affected by today’s rating action have been displaying reassuring levels of liquidity, amply covering their short-term funding positions.

No mechanistic correlation between short-term and long-term bank ratings

Scope’s analysis of a bank’s funding and liquidity is a key element underpinning both short- and long-term ratings. For short-term ratings, this aspect – including the role played by changed market sentiment – is paramount. For long-term ratings, it is part of a multi-pronged analysis, alongside other risks which may present more of a medium-term threat (doubtful business models, higher risk appetite, asset quality and capital erosion, etc.).

Given these aspects, a certain degree of short-term/long-term rating correlation exists. However, Scope does not establish strict mechanistic correlations between the two rating scales, leaving room for analytical discretion based on each bank’s short-term credit fundamentals.

The following short-term ratings were upgraded, all with Stable Outlook:

Belgium:

• KBC Group NV to S-1+ from S-1

Denmark:

• Danske Bank A/S to S-1+ from S-1

France:

• Banque Federative du Credit Mutuel SA to S-1+ from S-1
• BNP Paribas SA to S-1+ from S-1
• BPCE SA to S-1+ from S-1
• Credit Agricole SA to S-1+ from S-1
• Societe Generale SA to S-1+ from S-1

Italy:

• Intesa Sanpaolo Spa to S-1 from S-2
• Unicredit Spa to S-1 from S-2

Netherlands:

• Coöperatieve Rabobank U.A. to S-1+ from S-1
• ING Bank NV to S-1+ from S-1

Norway:

• DNB Bank ASA to S-1+ from S-1

Spain:

• Banco Bilbao Vizcaya Argentaria SA to S-1+ from S-1
• Banco Santander SA to S-1+ from S-1

Sweden:

• Nordea Bank AB to S-1+ from S-1
• Svenska Handelsbanken AB to S-1+ from S-1

Switzerland:

• Credit Suisse AG to S-1+ from S-1

(Credit Suisse Group AG’s short-term rating has been upgraded to S-1+ from S-1 and withdrawn concomitantly)

United Kingdom:

• Barclays Bank PLC to S-1+ from S-1
• Lloyds Bank PLC to S-1+ from S-1
• Royal Bank of Scotland PLC to S-1 from S-2.

Regulatory disclosures

This credit rating and/or rating outlook is issued by Scope Ratings AG.

The rating analysis for COÖPERATIEVE RABOBANK U.A. & ING BANK NV & KBC Group NV has been prepared by Chiara Romano, Senior Analyst. The rating analysis for BANQUE FEDERATIVE DU CREDIT MUTUEL SA & BPCE SA & NORDEA BANK AB & BNP PARIBAS SA & DANSKE BANK A/S & SVENSKA HANDELSBANKEN AB has been prepared by Jennifer Ray, Executive Director. The rating analysis for BARCLAYS BANK PLC & CREDIT AGRICOLE SA & LLOYDS BANK PLC & ROYAL BANK OF SCOTLAND PLC & SOCIETE GENERALE SA & DNB BANK ASA & CREDIT SUISSE AG has been prepared by Pauline Lambert, Executive Director. The rating analysis for BANCO SANTANDER SA & BANCO BILBAO VIZCAYA ARGENTARIA SA & INTESA SANPAOLO SPA & UNICREDIT SPA has been prepared by Marco Troiano, Executive Director. Responsible for approving the ratings: Sam Theodore, Managing Director

The short-term rating for COÖPERATIEVE RABOBANK U.A. was first assigned by Scope on 02.04.2014. The rating was last updated on 20.02.2015. The short-term rating for ING BANK NV was first assigned by Scope on 02.04.2014. The rating was last updated on 20.02.2015. The short-term rating for KBC Group NV was first assigned by Scope on 02.04.2014. The rating was last updated on 03.12.2015. The short-term rating for BANQUE FEDERATIVE DU CREDIT MUTUEL SA was first assigned by Scope on 02.04.2014. The rating was last updated on 20.02.2015. The short-term rating for BPCE SA was first assigned by Scope on 02.04.2014. The rating was last updated on 20.02.2015. The short-term rating for NORDEA BANK AB was first assigned by Scope on 19.11.2015. The rating was last updated on 20.02.2015. The short-term rating for BARCLAYS BANK PLC was first assigned by Scope on 02.04.2014. The rating was last updated on 20.02.2015. The short-term rating for BNP PARIBAS SA was first assigned by Scope on 02.04.2014. The rating was last updated on 20.02.2015. The short-term rating for DANSKE BANK A/S was first assigned by Scope on 19.11.2014. The rating was last updated on 08.06.2017. The short-term rating for SVENSKA HANDELSBANKEN AB was first assigned by Scope on 02.04.2014. The rating was last updated on 20.02.2015. The short-term rating for CREDIT AGRICOLE SA was first assigned by Scope on 02.04.2014. The rating was last updated on 20.02.2015. The short-term rating for LLOYDS BANK PLC was first assigned by Scope on 02.04.2014. The rating was last updated on 20.02.2015. The short-term rating for ROYAL BANK OF SCOTLAND PLC was first assigned by Scope on 02.04.2014. The rating was last updated on 20.02.2015. The short-term rating for SOCIETE GENERALE SA was first assigned by Scope on 02.04.2014. The rating was last updated on 20.02.2015. The short-term rating for DNB BANK ASA was first assigned by Scope on 19.11.2014. The rating was last updated on 08.06.2017. The short-term rating for BANCO SANTANDER SA was first assigned by Scope on 02.04.2014. The rating was last updated on 08.06.2017. The short-term rating for BANCO BILBAO VIZCAYA ARGENTARIA SA was first assigned by Scope on 02.04.2014. The rating was last updated on 20.02.2015. The short-term rating for INTESA SANPAOLO SPA was first assigned by Scope on 11.06.2014. The rating was last updated on 20.02.2015. The short-term rating for UNICREDIT SPA was first assigned by Scope on 11.06.2014. The rating was last updated on 20.02.2015. The short-term rating for CREDIT SUISSE AG was first assigned by Scope on 02.04.2014. The rating was last updated on 10.04.2015. The short-term rating for CREDIT GROUP AG was first assigned by Scope on 24.06.2014. The rating was last updated on 10.04.2015.

Ratings for commercial paper and certificate of deposit programmes issued by COÖPERATIEVE RABOBANK U.A. were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Ratings for commercial paper and certificate of deposit programmes issued by ING BANK NV were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Ratings for commercial paper and certificate of deposit programmes issued by KBC Group NV were first assigned by Scope on 09.04.2015. The rating was last updated on 03.12.2015. Ratings for commercial paper and certificate of deposit programmes issued by BANQUE FEDERATIVE DU CREDIT MUTUEL SA were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Ratings for commercial paper and certificate of deposit programmes issued by BPCE SA were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Ratings for commercial paper and certificate of deposit programmes issued by NORDEA BANK AB were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Ratings for commercial paper and certificate of deposit programme issued by BARCLAYS BANK PLC were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Rating for certificate of deposit programmes issued by BNP PARIBAS SA were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Ratings for commercial paper and certificate of deposit programmes issued by DANSKE BANK A/S were first assigned by Scope on 09.04.2015. The rating was last updated on 08.06.2017. Ratings for certificate of deposit programmes issued by CREDIT AGRICOLE SA were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Ratings for commercial paper programmes issued by BANCO SANTANDER SA were first assigned by Scope on 09.04.2015. The ratings was last updated on 08.06.2017. Ratings for commercial paper and certificate of deposit programmes issued by ROYAL BANK OF SCOTLAND PLC were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Ratings for commercial paper and certificate of deposit programmes issued by SOCIETE GENERALE SA were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Ratings for certificate of deposit programmes issued by LLOYDS BANK PLC were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Ratings for commercial paper and certificate of deposit programmes issued by BANCO BILBAO VIZCAYA ARGENTARIA SA were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Ratings for commercial paper and certificate of deposit programmes issued by INTESA SANPAOLO SPA were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015. Ratings for commercial paper and certificate of deposit programmes issued by UNICREDIT SPA were first assigned by Scope on 09.04.2015. The rating was last updated on 09.04.2015.

Methodology
The methodology used for this ratings and rating outlooks (Bank Rating Methodology - May 2017) is available on www.scoperatings.com.
Historical default rates of Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA Please also refer to 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 definition of default as well as definitions of rating notations can be found in Scope’s public credit rating methodologies on www.scoperatings.com.
The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months.

Stress testing & cash flow analysis
No stress testing was performed. No cash flow analysis was performed.

Solicitation, key sources and quality of information
The ratings for COÖPERATIEVE RABOBANK U.A. & NORDEA BANK AB & COÖPERATIEVE RABOBANK U.A. & BARCLAYS BANK PLC & BNP PARIBAS SA & SVENSKA HANDELSBANKEN AB & CREDIT AGRICOLE SA & LLOYDS BANK PLC & ROYAL BANK OF SCOTLAND PLC & SOCIETE GENERALE SA & DNB BANK ASA & BANCO SANTANDER SA & BANCO BILBAO VIZCAYA ARGENTARIA SA & INTESA SANPAOLO SPA & CREDIT SUISSE AG & UNICREDIT SPA The rating was initiated by Scope and was not requested by the rated entity or its agents. The rated entity and/or its agents participated in the rating process. Scope had no access to accounts, management and/or other relevant internal documents for the rated entity or related third party.
The ratings for BANQUE FEDERATIVE DU CREDIT MUTUEL SA & ING BANK NV & BPCE SA The rating was initiated by Scope and was not requested by the rated entity or its agents. The rated entity and/or its agents did not participate in the rating process. Scope had no access to accounts, management and/or other relevant internal documents for the rated entity or related third party.
The following substantially material sources of information were used to prepare the credit rating: Issuer, third parties and public domain. Scope considers the quality of information available to Scope on the rated entity or instrument to be satisfactory. The information and data supporting Scope’s ratings originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data.
Prior to publication, the rated entities were given the opportunity to review the rating and/or outlook and the principal grounds on which the credit rating and/or outlook is based. Following that review, the rating was not amended before being issued.

Potential conflicts
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. Please see www.scoperatings.com. for a list of potential conflicts of interest related to the issuance of credit ratings.

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 does not, 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 other 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 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.

Scope Ratings AG, Lennéstrasse 5, 10785 Berlin, District Court for Berlin (Charlottenburg) HRB 161306, Executive Board: Torsten Hinrichs (CEO), Dr. Stefan Bund; Chair of the Supervisory Board: Dr. Martha Boeckenfeld.