Moody's Investors Service Inc. has become the latest of the
three big debt rating firms to warn that new European Union rules
could make stakeholders more vulnerable to losses in any future
banking crisis.
In response to the EU's so-called Bank Recovery and Resolution
Directive, under which shareholders, bondholders and some
depositors may have to stomach big losses or commit to so-called
"bail ins" to help rescue ailing banks, Moody's has cut its
long-term rating outlook on 82 European banks to negative. That
means the banks' debt ratings are more likely to be downgraded than
affirmed or upgraded over the next year to 18 months.
Banks affected include UniCredit SpA, Commerzbank AG, Nationwide
Building Society, KBC Bank NV and Bankinter SA. By country, 12
German banks are affected, 10 French banks, eight in Austria, five
in Sweden, four in Italy, three in the Netherlands, two in Spain
and one in the U.K.
The BRRD also states that countries--through taxpayers'
money--can provide additional capital support to a lender only when
a bank bails in at least 8% of the total liabilities, or at least
30% of risk-weighted assets.
"The balance of risk for banks' senior unsecured creditors has
shifted to the downside," Moody's said in a statement. "While
Moody's support assessments are unchanged for now, the probability
has risen that they will be revised downwards to reflect the new
framework."
The move by Moody's follows similar action from Standard &
Poor's Ratings Services in April and Fitch Ratings in March, but
strategists largely expect the moves to have limited impact on
European bank stocks, with many saying the action had been priced
in after the European Council officially adopted the BRRD on May
6.
"Ultimately, Moody's will be paring back the amount of sovereign
support it allows, but there seem to be very few cases where the
posited reductions will move a bank from one ratings category to
another," said Mizuho credit strategist Roger Francis.
Write to Josie Cox at josie.cox@wsj.com
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