RPT-Fitch: State Support to Remain For Some EU Banks

Mon Apr 14, 2014 8:43am EDT

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April 14 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings says that a small group of banks in the European Union will continue to have state support factored into their ratings due to specific forms of state sponsorship for each of them, according to two new reports.

Fitch would continue to factor support into the ratings of some banks for three main reasons: they have a specific, recognised policy role; they are in orderly run-down under state ownership or sponsorship; or the state is a long-term strategic investor, as is the case, for example, with the German Landesbanken. A considerable proportion of German banks' ratings benefit from state support and are likely to continue to do so. Of 23 banking groups based in Germany and rated by Fitch, 19 have Issuer Default Ratings based on state support. Fitch is likely to retain some degree of support consideration in 15 of these, and has therefore published a separate report on support for German banks.

The EU's Bank Recovery and Resolution Directive and the Single Resolution Mechanism for Banking Union countries are scheduled to be voted on in the European Parliament on 15 April. Once incorporated into national laws and regulations they will make extraordinary support for senior creditors in banks less likely.

Fitch highlighted in March that weakening sovereign support mostly affects EU and US banks (see "Sovereign Support for Banks Rating Path Expectations" available at www.fitchratings.com). The new reports expand on rating reviews in March announced in "Fitch Revises Outlooks on 18 EU State-Sponsored Banks to Negative on Weakening Support", dated 26 March, which accompanied a series of other rating actions around the globe.

The reports, "Rating Paths for EU State-Sponsored Banks" and "Various Support Rating Paths for German Banks", are available on www.fitchratings.com.

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