SNS rescue unlikely to cost Dutch triple-A rating -Moody's

Mon Feb 4, 2013 6:52am EST

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By Marc Jones
    LONDON, Feb 4 (Reuters) - The 10 billion euro rescue of bank
group SNS Reaal is unlikely to cost the Netherlands its
prized triple-A credit rating but has negative implications for
the country's other banks, Moody's said on Monday.
    "The cost being incurred by the government in support of SNS
REAAL is small relative to the size of State's balance sheet,"
the ratings firm said in an e-mailed statement to Reuters,
noting that it currently assigns the Dutch government its
highest rating of Aaa, with a negative outlook.
    The Dutch government said on Friday it had put together a
nationalisation package - which follows a much smaller bailout
in 2008 - to prevent SNS Reaal's collapse and shore up
confidence in the financial system. 
    But the rescue will add to a Dutch budget deficit that is
already forecast to exceed European Union targets in 2013, and
some fear it could cost the Netherlands its triple-A status.
    Prime Minister Mark Rutte said on Friday that the rescue
represented a "serious setback" for the government's finances.
    The Netherlands is one of only four euro zone countries -
along with Germany, Finland and Luxembourg - still assigned the
highest credit rating by all three major rating firms after a
slew of downgrades during the bloc's three-year-old debt crisis.
 
    Moody's and Standard & Poor's have both warned they might
downgrade the Netherlands if its finances and economy continue
to deteriorate, although Moody's comments on Monday suggested
the bank rescue will not be large enough to tip the balance.
    But it warned separately that the problems at SNS Reaal
could have implications for the rest of the country's lenders. 
    "The nationalisation of SNS is credit-negative for Dutch
banks," Moody's Associate Managing Director Nick Hill said in a
note.
    Such large losses "show that its asset quality problems are
more severe and deep-rooted than previously thought, which has
implications for our assessment of the creditworthiness of other
Dutch financial institutions, in particular those exposed to
commercial real estate and especially the Dutch office sector."
    Hill said the government's plans to recoup some of the cost
of the SNS recapitalisation by imposing a levy of 1 billion
euros on other Dutch banks, and its decision to hit subordinated
bondholders hard, would also have a negative impact.
    "It may set a precedent for similar situations elsewhere in
Europe, exposing investors in subordinated debt to greater
loss-given-default than previously the case," Hill added.

 (Reporting by Marc Jones; Editing by Catherine Evans)
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