Fitch Ratings has affirmed
A full list of rating actions is below.
Fitch has withdrawn DCL's Support Rating of '2' and Support Rating Floor of 'BBB+' as they are no longer relevant to the agency's coverage following the publication of its updated Bank Rating Criteria. In line with the updated criteria, we have assigned DCL a Government Support Rating (GSR) of 'bbb+'.
Key Rating Drivers
Support-driven Ratings: DCL's ratings reflect Fitch's view of a high probability that additional support would be provided to DCL by
Strong Evidence of Support: Our view is based on
Stable Outlook: The Outlook is Stable despite the Negative Outlook on
No Retroactive Application of BRRD: Fitch continues to factor in state support for DCL despite the implementation of the EU's Bank Recovery and Resolution Directive (BRRD). This reflects our view that the BRRD will not be applied retroactively to DCL, as long as its orderly wind-down progresses consistently with plans agreed with the
Low Risk of Senior Bail-In: Fitch views the risk of senior creditor bail-in as low for DCL. We expect
Deleveraging Progressing Well: DCL's balance sheet was about
Extension of State-Guaranteed Debt: The
No Viability Rating Assigned: Fitch does not assign a Viability Rating to DCL because it cannot be meaningfully analysed as a viable entity in its own right. DCL is in orderly wind-down and relies on state guarantees for funding.
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
DCL's ratings are sensitive to a weakening in
A material deviation from DCL's wind-down plan agreed with the
Factors that could, individually or collectively, lead to positive rating action/upgrade:
An upgrade would be contingent on the two states demonstrating even greater support, which we view as unlikely. We could upgrade DCL's Long-Term IDR if
We could also upgrade DCL's Long-Term IDR if it sustainably reduces the size of its balance sheet well below the state guarantee size, while the need for additional capital injection becomes clearly remote.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
SHORT-TERM IDR
DCL's Short-Term IDR of 'F1' is the higher of the two possible Short-Term IDRs mapping to a 'BBB+' Long-Term IDR. This is because we view the sovereigns' propensity to support as more certain in the near term. We also view the risk of the Belgian or French sovereign paying their direct obligations ahead of providing support to DCL as low and have not identified other potential impediments to the prompt flow of funds to DCL.
STATE-GUARANTEED DEBT
The 'AA-'/'F1+' ratings of DCL's debt guaranteed by
Since
SENIOR PREFERRED DEBT
DCL's senior preferred debt is rated in line with the Long-Term IDR.
DERIVATIVE COUNTERPARTY RATING (DCR)
The 'BBB+(dcr)' DCR is at the same level as DCL's Long-Term IDR as the IDR is based on sovereign support and because derivative counterparties in
JUNIOR SUBORDINATED DEBT
DCL's deeply subordinated Tier 1 notes' (FR0010251421) 'C' rating reflects the continued ban imposed by the
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
SHORT-TERM IDR
DCL's Short-Term IDR could be downgraded if the Long-Term IDR was downgraded.
STATE-GUARANTEED DEBT
The 'AA-' long-term rating on DCL's state-guaranteed debt is sensitive to rating action on the lowest-rated guarantor, which is currently
SENIOR PREFERRED DEBT
DCL's senior preferred debt ratings are primarily sensitive to changes in its IDRs.
DERIVATIVE COUNTERPARTY RATING
DCL's DCR is primarily sensitive to changes in its Long-Term IDR.
JUNIOR SUBORDINATED DEBT
Fitch does not expect coupon payment to resume on DCL's deeply subordinated Tier 1 notes and therefore sees no upside for the instrument's rating.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
DCL's ratings are sensitive to rating action on
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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