OREANDA-NEWS. June 04, 2015. Fitch Ratings today published a special report setting out the agency's support assumptions for the German Landesbanken. The Long-Term Issuer Default Ratings (IDR) of the rated Landesbanken are driven by institutional support and are based on our assessment that the owners of the Landesbanken, the respective Laender and regional savings banks, see their investment as long-term and strategic. The strong propensity to support Landesbanken reflects the banks' increased focus on their statutory roles, supporting the regional economies, acting as the states' house bank, and working with the savings banks.

We believe that support would need to be forthcoming from both the Laender and the Sparkassen to avoid triggering state aid considerations and resolution under the EU's Bank Recovery and Resolution Directive (BRRD) if a Landesbank becomes insolvent. Therefore, we take the lower of the two parents' ratings as the anchor rating for our support assessment.

We notch twice from the Sparkassen-Finanzgruppe's 'A+' anchor rating to arrive at IDRs of 'A-' for most Landesbanken. We widen the notching by a full rating category if we see threats to the long-term sustainability of a Landesbank's business model.

Fitch highlights the importance of pre-emptive support measures by the owners as part of recovery plans to reduce the risk of unexpected failures. If owners' support fails the private investor test, the participation of the Haftungsverbund (the mutual support scheme of Landesbanken and savings banks) in the support measures could still result in avoidance of resolution, as long as the viability of the failed Landesbank can be restored.

The full report, 'Revised Support Assumptions for German Landesbanken', is available at www.fitchratings.com.