TEXT-S&P cuts several European banks' subordinated debt

-- The European Commission has proposed a framework for a bank recovery
and resolution regime, which in our view reduces the likelihood that
subordinated debt will benefit from government support to negligible.
-- We are consequently removing any uplift for potential government
support from our issue ratings on subordinated instruments to reflect the
banks' stand-alone credit profiles only.
-- We are therefore lowering our ratings, by one or more notches, on
nondeferrable subordinated debt issued by banks in several European countries.

July 24 - Standard & Poor's Ratings Services said today that it had lowered
its issue ratings on nondeferrable subordinated debt issued by banks in several
European countries. These rating actions reflect our reading of the European
Commission's (EC's) proposal for a framework for bank recovery and resolution.

See the ratings list below for a full list of the banks affected.

On June 6, 2012, the EC published a draft directive on a bank recovery and
resolution framework. A bail-in tool introduced in this framework will allow
the government to transfer part of the financial burden of a bank's rescue to
investors. As stated in our publication of May 10, 2012, "How A Bail-In Tool
Could Affect Our Ratings On EU Banks," we already anticipated lowering our
ratings on banks' nondeferrable subordinated bonds as a result of the upcoming
resolution regime.

Today we are removing any uplift for potential government support from our
issue ratings on nondeferrable subordinated instruments issued by banks in
Europe. The issue ratings now solely reflect the banks' stand-alone credit
profiles (SACPs). SACPs reflect our view of a bank's credit risk without
extraordinary support from the government. We believe that by notching from
the SACP, we better capture the greater likelihood that government
intervention will not be available to support subordinated debt issues. Until
recently, notching from the long-term issuer credit rating (ICR) was the norm
for determining most of our ratings on bank capital instruments.

From our reading of the EC proposal, the likelihood that subordinated debt
will benefit from government support will become negligible. The upcoming EC
regulation gives the authorities sufficient flexibility to inhibit the
performance of subordinated debt without forcing a bank into liquidation, even
if there were a conflict with terms and conditions. We see an important
indicator of potential for "bailing in" various regulatory capital
instruments, including subordinated debt, in the regulators' ability to
transfer assets and liabilities to other legal entities--such as a bridge
bank, or a "bad bank"--in a way that could impede the servicing of
subordinated debt.

To derive the ratings on subordinated bank debt, we deduct one notch from the
SACP of banks with SACPs in the 'bbb-' category or higher, and two notches if
the SACP is at 'bb+' or lower. Before these rating actions, we already notched
our ratings on nondeferrable subordinated bank debt in 10 European countries
from the SACP, reflecting our assessment of the regulatory and legal
frameworks in these countries. We will now notch from the SACP in all European
countries.

The ICR and our ratings on other bank debt are not affected by these rating
actions. For senior obligations, notwithstanding the proposed directive's
intention of limiting the cost of bank rescues for taxpayers, we observe that
the proposed directive does not prohibit extraordinary support and we would
need to understand governments' intentions and incentives as the draft
directive moves toward final legislation.

The impact of these rating actions is greatest for banks with ICRs that factor
in a high uplift from their SACPs because of our expectation of future
extraordinary government support. Our ratings on subordinated debt issued by
banks with low systemic importance are not affected by these rating actions
because they already reflect the banks' SACPs only.

If a bank subsidiary benefits from group support and is located in a
non-European country where we continue to notch from the ICR, we cap the
rating on subordinated and hybrid capital instruments issued by that
subsidiary at no higher than, but potentially lower than, the issue rating on
the parent bank's equivalent types of capital instruments. We consider that
restrictions on a parent bank's ability to pay its own nondeferrable
subordinated debt are likely to affect its ability to support nondeferrable
subordinated debt issued by subsidiaries. We use this approach unless the ICR
on the subsidiary is higher than that on the parent (see Subpart E of "Group
Rating Methodology And Assumptions," published Nov. 9, 2011).

With the momentum building internationally toward wider implementation of
resolution regimes, we will continue to monitor regulatory and legal
developments in other regions. Accordingly, we expect to continue increasing
the number of countries for which we notch from the SACP instead of the ICR as
more resolution regimes are adopted and implemented globally.

RATINGS LIST
Downgraded
To From
Luxembourg
Banque et Caisse d'Epargne de l'Etat, Luxembourg
Nondeferrable subordinated debt A AA

Finland
Nordea Bank Finland PLC
Nondeferrable subordinated debt A A+

Pohjola Bank PLC
Nondeferrable subordinated debt A A+

Sampo Bank PLC
Nondeferrable subordinated debt BBB- BBB+

Sweden
Nordea Bank AB
Nondeferrable subordinated debt A A+

SBAB Bank AB
Nondeferrable subordinated debt BBB+ A

Skandinaviska Enskilda Banken AB (publ)
Nondeferrable subordinated debt BBB+ A

Svenska Handelsbanken
Nondeferrable subordinated debt A A+

Swedbank AB
Nondeferrable subordinated debt BBB+ A

Swedish Export Credit Corp.
Nondeferrable subordinated debt BBB+ AA

Norway
DNB Bank ASA
Nondeferrable subordinated debt A- A

Austria
Erste Group Bank AG
Nondeferrable subordinated debt BBB A-

HYPO NOE Gruppe Bank AG
Nondeferrable subordinated debt BBB A-

Oberoesterreichische Landesbank AG (1)
Nondeferrable subordinated debt BBB- A-

Raiffeisen Bank International AG
Nondeferrable subordinated debt BBB A-

Raiffeisen Zentralbank Oesterreich AG
Nondeferrable subordinated debt BBB A-

UniCredit Bank Austria AG (2)
Nondeferrable subordinated debt BBB+ A-

(1) The 'AA+/Negative' ratings on Oberoesterreichische Landesbank's guaranteed
subordinated obligations, which benefit from a guarantee from the State of
Upper Austria (AA+/Negative/A-1+), are not affected by this action.

(2) The 'AA' ratings on UniCredit Bank Austria's guaranteed subordinated
obligations, which reflect the deficiency guarantee from the City of Vienna
(unsolicited rating AA+/Negative/A-1+), are not affected by this action.

Ratings Affirmed
Russia
Raiffeisenbank ZAO
Nondeferrable subordinated debt BBB-

Sweden
Landshypotek AB
Nondeferrable subordinated debt A-

Denmark
Danske Bank A/S
Nondeferrable subordinated debt BB+

RELATED CRITERIA AND RESEARCH
All articles listed below are available on RatingsDirect on the Global Credit
Portal, unless otherwise stated.
-- How A Bail-In Tool Could Affect Our Ratings On EU Banks, May 10, 2012
-- Applying The Bank Hybrid Capital Criteria To Specific Instruments,
Dec. 20, 2011
-- Sharing The Burden Of Bank Support: Countries Where Subordinated Debt
Is Becoming Riskier, Nov. 29, 2011
-- Group Rating Methodology And Assumptions, Nov. 9, 2011
-- Banks: Rating Methodology and Assumptions, Nov. 9, 2011
-- Bank Hybrid Capital Methodology and Assumptions, Nov. 1, 2011
-- Bank Resolution Regimes: Potential Rating Implications As Sovereign
Support Frameworks Evolve, March 16, 2011
-- General Criteria: Rating Government-Related Entities: Methodology And
Assumptions, Dec. 9, 2010

EXTERNAL RESEARCH
-- "Proposal for a directive of the European parliament and of the
council establishing a framework for the recovery and resolution of credit
institutions and investment firms and amending Council Directives 77/91/EEC
and 82/891/EC, Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC,
2007/36/EC and 2011/35/EC and Regulation (EU) No 10093/2010," Brussels, DG
Internal Market And Services, June 6, 2012
-- "Bank recovery and resolution proposal: Frequently Asked Questions,"
European Commission Memo, Brussels, June 6, 2012
-- "Discussion Paper On The Debt Write-Down Tool - Bail-In," DG Internal
Market of the European Commission, Brussels, March 30, 2012

Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at www.globalcreditportal.com. All ratings affected
by this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left
column.