London, 23 June 2015 -- Moody's Investors Service has today assigned Counterparty Risk Assessments (CR Assessments) to three Ukrainian banks. It has assigned CR Assessments of Caa2(cr) to Raiffeisen Bank Aval, and Caa3(cr) to Privatbank and Savings Bank of Ukraine. Concurrently, Not-Prime(cr) short-term CR Assessments have been assigned to all the banks.
This announcement follows the publication of the rating agency's new bank rating methodology (see "Rating Methodology: Banks" published on 16 March 2015).
RATINGS RATIONALE
CR ASSESSMENTS
CR Assessments are opinions of how counterparty obligations are likely to be treated if a bank fails and are distinct from debt and deposit ratings in that they (1) consider only the risk of default rather than expected loss and (2) apply to counterparty obligations and contractual commitments rather than debt or deposit instruments. The CR Assessment is an opinion of the counterparty risk related to a bank's covered bonds, contractual performance obligations (servicing), derivatives (e.g., swaps), letters of credit, guarantees and liquidity facilities.
For Ukrainian banks, the CR Assessment is positioned, prior to government support, one notch above the Adjusted BCA and therefore above senior unsecured and deposit ratings, reflecting Moody's view that its probability of default is lower than that of senior unsecured debt and deposits. Moody's believes that senior obligations represented by the CR Assessment will be more likely preserved in order to limit contagion, minimize losses and avoid disruption of critical functions.
Moody's then adds the same likelihood of government support uplift as applied to deposit ratings. However, none of the Ukrainian banks covered in this announcement benefits from government support as the government's capacity to support these banks in case of need is very limited.
As a result, the CR Assessment of Caa3(cr) for Privatbank and Savings Bank of Ukraine are one notch higher than their deposit ratings. The CR Assessments of Caa2(cr) for the foreign-owned bank Raiffeisen Bank Aval, capped by the local currency deposit ceiling of Caa2, benefit from affiliate support and are aligned with its deposit rating.
The principal methodology used in these CR assessments was Banks published in March 2015. Please see the Credit Policy page on
www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
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www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.
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The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at
www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead analyst and the Moody's legal entity that has issued the ratings.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on
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Petr Paklin
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Limited, Russian Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
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Russia
Yves Lemay
MD-Banking & Sovereign
Financial Institutions Group
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