LONDON, April 2 The risk that creditors rather
than taxpayers will bear the brunt of rescuing a bank in trouble
form part of the first credit ratings given to 18 of Europe's
biggest banks on Wednesday by new ratings agency Scope.
The company, which set up in Berlin in 2002 and started
credit ratings two years ago, said it aims to offer a new
approach for corporate bond investors that typically rely on the
three major ratings firms - Moody's Investors Service, Standard
& Poor's and Fitch Ratings.
Scope said its ratings reflected the likelihood that if a
bank runs into trouble, bondholders will be "bailed in" to
strengthen the bank rather than a taxpayer-funded rescue as
happened during the financial crisis.
"Banks are still too big to fail, the only difference is
that somebody else will pay to avoid a failure, and that
somebody else is the creditors," Sam Theodore, Scope's managing
director for financial institutions, said.
"Through bail-in you could call this the privatisation of
bank rescues, which to us is one of the most significant
regulatory steps taken in recent years in respect to banks,"
A new resolution and recovery regime for banks is in place
in Switzerland and is coming in across the European Union.
This reflects an attempt by regulators to ensure banks are not
"too big to fail" and are not guaranteed state support in a
crisis. An International Monetary Fund report this week,
however, showed banks still benefit from implicit state support,
especially in Europe.
Scope said its bank ratings do not receive any uplift for
sovereign support unless the state owns a majority, such as for
Royal Bank of Scotland. It said its ratings are more
geared to forecasts for balance sheet strength and earnings.
It said the banks it rated were all in significantly
stronger credit shape than before the crisis, with higher levels
of capital and liquidity and lower risks in their businesses.
Its ratings ranged from BBB+ for RBS and Commerzbank
to AA- for BNP Paribas and HSBC.
Deutsche Bank was given a rating of A-, below the A
ratings for Santander and BBVA.
RBS and Commerzbank had made a lot of progress with their
restructuring, but RBS was still loss-making and its
restructuring could take 4-6 years more, while Commerzbank was
still absorbing losses in its non-core arm, it said.
(Reporting by Steve Slater; Additional reporting by Laura
Noonan. Editing by Jane Merriman)