On 15 November 2018, the EU’s Creditor Hierarchy Directive was implemented in Finland by way of changes to the Finnish Act on Credit Institutions. This addresses the provisions of BRRD in Finland by introducing a new class of non-preferred senior unsecured debt. Scope now upgrades the rating of Nordea Bank Abp’s senior unsecured debt not eligible for TLAC and/or MREL to AA- from A+, bringing the rating in line with the bank’s AA- Issuer Rating, and assigns a new rating of A+ to the bank’s senior non-preferred debt.

These rating actions are in line with Scope’s bank rating methodology (last updated in May 2018) and take into account the ranking of TLAC/MREL senior unsecured debt. While the credit fundamentals of the group did not change, Scope is of the view that senior unsecured liabilities not eligible for TLAC/MREL should benefit from the protection of a materially ampler capital structure in a default-like scenario.

Nordea has confirmed that its existing senior non-preferred debt will be aligned with the new framework. The existing securities were issued on a contractual basis in anticipation of the legislative change, containing alignment provisions allowing Nordea to specify the lower priority ranking after implementation of the new framework.

The following rating of Nordea Bank Abp is assigned, with Stable Outlook:

Senior non-preferred debt:    A+

The following rating of Nordea Bank Abp, is upgraded, with Stable Outlook:

Senior unsecured (non MREL-eligible) debt rating:  A+ to AA-

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, 2018 is available on www.scoperatings.com.
Historical default rates of the entities rated by 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 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: 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 senior unsecured (non MREL-eligible) debt rating/outlook was first released by Scope on 01.10.2018.
The senior non-preferred debt rating/outlook was first released by Scope on 10.12.2018.

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
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