Overview -- In our view, Dutch banks are exposed to the potential of a more protracted downturn in The Netherlands and wider eurozone. -- We are therefore revising our economic risk score for The Netherlands and our Banking Industry Country Risk Assessment to '3' from '2'. -- We believe that Dutch private bank F. Van Lanschot Bankiers' (Van Lanschot) cost of risk has increased since mid-2011 owing to the weaker domestic environment in which it operates. -- We are therefore lowering our long-term ratings on Van Lanschot to 'BBB+' from 'A-' and affirming the 'A-2' short-term ratings. -- The stable outlook primarily reflects our expectation that the bank should be able to maintain its strong capitalization despite the pressure on its operating environment. Rating Action On Nov. 16, 2012, Standard & Poor's Ratings Services lowered its long-term counterparty credit rating on Dutch private bank F. van Lanschot Bankiers N.V. (Van Lanschot) to 'BBB+' from 'A-'. At the same time, we affirmed the 'A-2' short-term ratings. The outlook is stable. In addition, we lowered by one notch our subordinated and junior subordinated debt ratings on all hybrid capital instruments issued by Van Lanschot. Rationale The lowering of the long-term rating follows our review of the Banking Industry Country Risk Assessment (BICRA) on The Netherlands. Against the backdrop of a potentially more protracted downturn in The Netherlands and the wider eurozone, we have revised our economic risk score for The Netherlands and our BICRA assessment to '3' from '2' (for more information, see "Various Rating Actions Taken On Dutch Banks Due To Increased Economic Risks," published Nov. 16, 2012 on RatingsDirect on the Global Credit Portal). We have revised our assessment of systemwide risks that Dutch banks are exposed to, which has led us to lower our anchor--or starting point for our ratings--for commercial banks operating in The Netherlands, including Van Lanschot, to 'bbb+' from 'a-'. In our view, Van Lanschot's weaker performance since mid-2011 to some extent demonstrates the effect of the weaker domestic environment. We have therefore lowered the bank's stand-alone credit profile (SACP) to 'bbb+' from 'a-', in line with the anchor. We view Van Lanschot's risk position as "adequate" (as defined by our criteria). Our assessment balances a tightening in the bank's underwriting and risk appetite since 2008, which has led to a reduction in the loan book, against some volatility in the asset-quality track record in recent years. The cost of credit risk peaked in 2009, then recovered in 2010 and early 2011, before spiking again in first-half 2012. Despite the de-risking of the bank's portfolio in recent years, we expect the outlook for the rest of 2012 and early 2013 to remain clouded by the difficult economic environment, as we reflect in our moderately weaker economic risk assessment for the Dutch banking system. We view the bank's loan book as adequately diversified--about one-half is made up of residential mortgages. However, the property book (18% of lending at June 2012) and exposures to other small and midsize enterprises (SMEs) have contributed to relatively elevated losses since mid-2011, with impairment charges at slightly more than 60 basis points of average loans in the first half of 2012. Some reputational and operational risks are inherent in the bank's private banking activities, although we consider that its good track record to date somewhat mitigates these risks. We consider the bank's business position to be "moderate" due to its relatively niche franchise in The Netherlands. Despite the constraints on revenues from the weaker environment, we expect Van Lanschot to be in a position to preserve its franchise. We view capital and earnings as "strong" since we expect our risk-adjusted capital (RAC) ratio before diversification adjustments to remain over 10% over the next 18 months. Our prospective assessment takes into account the negative impact of our revised assessment of economic risk for the Dutch banking system on Van Lanschot's risk-weighted assets under our RAC framework. We view funding as "average" and liquidity as "adequate". This view balances the moderately better-than-average loan-to-deposit ratio against the larger average size of the bank's deposits compared with peers. We do not factor any notches of support into our ratings on Van Lanschot. Outlook The stable outlook primarily reflects our expectation that the bank should be able to maintain its strong capitalization despite the pressure on its operating environment. We could lower the ratings on Van Lanschot if we see signs that the bank's capitalization is weakening, leading us to revise our projected RAC ratio to around 10% or less. We could raise the ratings if Van Lanschot's business position were to improve substantially, demonstrated among other things by large net inflows of client assets and a sustained increase in revenues and earnings. This would be subject to increased stability in the economic environment. Ratings Score Snapshot Issuer Credit Rating BBB+/Stable/A-2 SACP bbb+ Anchor bbb+ Business Position Moderate (-1) Capital and Earnings Strong (+1) Risk Position Adequate (0) Funding and Liquidity Adequate (0) Support 0 GRE Support 0 Group Support 0 Sovereign Support 0 Additional Factors 0 Related Criteria And Research All articles listed below are available on RatingsDirect on the Global Credit Portal, unless otherwise stated. -- Various Rating Actions Taken On Dutch Banks Due To Increased Economic Risks, Nov. 16, 2012 -- Banking Industry Country Risk Assessment: The Netherlands, Nov. 16, 2012 -- Dutch Private Bank F. van Lanschot Bankiers Outlook Revised To Negative On Weaker Environment; 'A-/A-2' Ratings Affirmed, Oct. 4, 2012 -- Economic Research: The Eurozone's New Recession--Confirmed, Sept. 25, 2012 -- F. van Lanschot Bankiers N.V., Sept. 7, 2012 -- No Pain, No Gain: How The Housing Market Correction Is Affecting Dutch Banks, June 27, 2012 -- Banks: Rating Methodology And Assumptions, Nov. 9, 2011 -- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011 -- Bank Hybrid Capital Methodology And Assumptions, Oct. 24, 2011 -- Bank Capital Methodology And Assumptions, Dec. 6, 2010 Ratings List Downgraded; CreditWatch/Outlook Action; Ratings Affirmed To From F. van Lanschot Bankiers N.V. Counterparty Credit Rating BBB+/Stable/A-2 A-/Negative/A-2 Certificate Of Deposit BBB+/A-2 A-/A-2 Senior Unsecured BBB+ A- Subordinated BBB BBB+ Junior Subordinated BBB- BBB 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.