(Repeat for additional subscirbers)
May 9 (The following statement was released by the rating agency)
Fitch Ratings has assigned Investitionsbank Schleswig-Holstein (IB-SH) a Long-term Issuer Default Rating (IDR) of 'AAA', Short-term IDR of 'F1+', Support Rating (SR) of '1' and Support Rating Floor (SRF) of 'AAA'. The Outlook on the Long-term IDR is Stable. A full list of rating actions is at the end of this rating action commentary.
KEY RATING DRIVERS - IDRS, SR and SRF
IB-SH's Long-Term IDR is equalised with that of its guarantor, the State of Schleswig-Holstein (State of SH; AAA/Stable). IB-SH is covered by a maintenance obligation (Anstaltslast) and an explicit guarantee obligation and a statutory guarantor's liability (Gewaehrtraegerhaftung). State of SH's creditworthiness is underpinned by the strength of the German solidarity system, which links its creditworthiness to that of the Federal Republic of Germany (see "Institutional Framework for German Subnationals", dated April 2008 at www.fitchratings.com). The bank's SR is based on this formalised support but also reflects the role that the bank fulfils for the State of SH. IB-SH's mandate to provide promotional and development funding is outlined in the Law Concerning IB-SH (Investitionsbankgesetz) and its statutes. IB-SH provides funding for economic, social, municipal, infrastructure, environmental and affordable and energy efficient real estate lending in the State of SH. In addition, IB-SH takes on special tasks if requested by the State of SH, for example the management and distribution of European development funds.
Fitch does not assign a Viability Rating to IB-SH as its business models are strongly linked to and dependent upon support from its state guarantor.
RATING SENSITIVITIES - IDRs, SR and SRF
The bank's IDRs are sensitive to a change in Fitch's assumptions around owner's support, specifically a downgrade of Germany or the State of SH, or a change in the terms of the state guarantees. Fitch does not consider any of these scenarios likely in the foreseeable future.
The Stable Outlook on the bank's ratings reflects Fitch view that the nature of the state support is unlikely to change significantly in the medium term due to the strategic importance of IB-SH to the SH economy and their entrenchment in the regional financial system. The support structure was approved by the European Union in 2002 and under competition law the bank may only engage in non-competitive activity. This also makes significant changes to the bank's business model unlikely in the medium term.
As part of its 26 March review of state support for banks globally, Fitch maintained Stable Outlooks on Long-term IDRs of banks that fulfil a specific policy function with state guarantees for all liabilities and/or solvency guarantees, like IB-SH (for further information, see bank-specific Rating Action Commentaries and Rating Action Reports at www.fitchratings.com).
For German development banks that benefit from guarantees from their Bundesland, including IB-SH, Fitch plans to switch the source of support it considers from systemic to institutional, most likely later in 2014 or in 1H15. This means that they will no longer have a SRF. This technical change means that Fitch will be looking directly to the federal state for its assessment of support rather than to Germany. It has no effect on IB-SH's IDR given that Fitch assesses all 16 German Bundeslaender (federal states) to have 'AAA' creditworthiness.
The rating actions are as follows:
Long-term IDR assigned at 'AAA', Stable Outlook
Short-term IDR assigned at 'F1+'
Support Rating assigned at '1'
Support Rating Floor assigned at 'AAA'