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      THURSDAY, 12/04/2018 - Scope Ratings GmbH
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      Scope affirms A senior unsecured debt ratings of Danske Bank A/S

      Scope’s rating action takes account of the final resolution plans announced by the Danish FSA for the country’s systemically important financial institutions (SIFIs); issuer rating unchanged at A+.

      Scope Ratings affirmed its A senior unsecured debt ratings of Danske Bank A/S following the recent announcement from Denmark’s Financial Supervisory Authority (FSA) in relation to the phasing in of MREL requirements for major Danish banking groups. Danske Bank’s A+ Issuer Rating remains unchanged.

      On 28th March 2018 the Danish FSA, as expected, confirmed that it will require the relevant banking groups to hold MREL-eligible liabilities, subordinated to other senior unsecured claims, which must be equivalent to at least 8% of total liabilities including own funds. According to the FSA this 8% requirement will take effect on 1st January 2022. In support of this the Danish Government aims to introduce a new layer in the creditor hierarchy (non-preferred senior debt) such that banks can use this layer to fulfil the MREL requirement, expected to take effect from 1 July 2018 onwards.

      To address the need for phasing in of the MREL requirement, the FSA has announced that while the total MREL requirement must be fulfilled by 1st January 2019, the subordination requirement will not kick in on that date, to give banks time to replace their existing senior unsecured debt with non-preferred senior debt to the extent needed. To allow this, debt issued prior to 1 January 2018 which meets all the MREL requirements except for legal subordination can be included in banks’ MREL measure until 1 January 2022. Scope pointed out that the MREL eligibility for Danske’s senior unsecured debt is already reflected by the A rating – one notch below the bank’s A+ Issuer Rating.

      This rating approach is detailed in Scope’s bank rating methodology (last updated in May 2017), which highlights that when sufficient legal clarity is achieved – as is expected to be the case once the new Danish law is in place – the agency applies a one-notch differential between the ratings of senior unsecured debt eligible for TLAC/MREL and the ratings of non-TLAC/MREL-eligible senior debt. Accordingly, Scope clarified that when Danske Bank will issue senior unsecured debt not eligible for MREL (so-called senior preferred) it will rate it at the level of the bank’s Issuer Rating, namely one notch above the MREL-eligible senior debt ratings.
      Affirmed with a Stable Outlook were Danske Bank’s A senior unsecured debt ratings. Scope added that Danske Bank’s Issuer Rating, Additional Tier 1 debt rating, and short-term rating remain unchanged with a Stable Outlook, at A+, BBB- and S-1+, respectively.

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

      Methodology
      The methodology used for this rating(s) and/or rating outlook(s) Bank rating methodology 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.

      Solicitation, key sources and quality of information
      The rating 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 following substantially material sources of information were used to prepare the credit rating: public domain, the rated entity and third parties.
      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 the issuance of the rating or outlook action, the rated entity was 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.

      Regulatory Disclosures
      This credit rating and/or rating outlook is issued by Scope Ratings GmbH.
      Lead analyst Jennifer Ray, Executive Director
      Person responsible for approval of the rating: Samuel Theodore, Group Managing Director
      The ratings/outlooks were first released by Scope on 19.11.2014. The ratings/outlooks were last updated on 08.06.2017.

      Potential conflicts
      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
      © 2018 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Investor Services GmbH and Scope Risk Solutions 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 GmbH at Lennéstrasse 5 D-10785 Berlin.

      Scope Ratings GmbH, Lennéstrasse 5, 10785 Berlin, District Court for Berlin (Charlottenburg) HRB 192993 B, Managing Director(s): Dr. Stefan Bund, Torsten Hinrichs.

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