18.08.2015, 13:59
Fitch Rates OCBC's Basel III Tier 1 Capital Securities 'BBB(EXP)'
OREANDA-NEWS. Fitch Ratings has assigned Singapore-based Oversea-Chinese Banking Corp's (OCBC) proposed Singapore dollar-denominated non-cumulative non-convertible perpetual capital securities an expected rating of 'BBB(EXP)'. The securities are intended to qualify as Additional Tier 1 capital securities of the bank under the Basel III regime.
The final rating is subject to the receipt of final documentation conforming to information already received.
KEY RATING DRIVERS
The securities are rated five notches below OCBC's 'aa-' Viability Rating (VR), comprising two notches for loss severity and three notches for non-performance risk, in accordance with Fitch's Global Bank Rating Criteria.
The loss severity is high in view of the securities' deep subordination status. The securities, together with all other Additional Tier 1 capital securities issued or guaranteed by OCBC, will rank ahead of claims only from OCBC's ordinary shareholders, and will rank below all senior liabilities and Tier 2 capital securities of the bank in liquidation.
The securities are also subject to write-off at a point of non-viability as determined by the Monetary Authority of Singapore (MAS). The amount to be written off will be as much as is required for the bank to cease to be non-viable, as determined by OCBC in consultation with MAS, or as directed by MAS, up to the full principal and dividend amount on the securities. The full principal and dividend amount must be written off ahead of any write-off of OCBC's Basel III Tier 2 securities.
Non-performance risk arises from OCBC's unrestricted discretion in cancelling any periodic distribution on the proposed securities. OCBC will also not be obliged to pay any distribution if it is prevented from doing so under Singapore banking regulations or other requirements of the MAS. Distribution on the securities would otherwise be made semi-annually at a fixed rate, based on the prevailing principal amount, subject to reset on the applicable reset dates.
RATING SENSITIVITIES
A change in OCBC's VR will have an impact on the securities' ratings.
OCBC's other ratings are as follows:
Long-Term Issuer Default Rating 'AA-'; Outlook Stable
Short-Term Issuer Default Rating 'F1+'
Viability Rating 'aa-'
Support Rating '1'
Support Rating Floor 'A-'
The final rating is subject to the receipt of final documentation conforming to information already received.
KEY RATING DRIVERS
The securities are rated five notches below OCBC's 'aa-' Viability Rating (VR), comprising two notches for loss severity and three notches for non-performance risk, in accordance with Fitch's Global Bank Rating Criteria.
The loss severity is high in view of the securities' deep subordination status. The securities, together with all other Additional Tier 1 capital securities issued or guaranteed by OCBC, will rank ahead of claims only from OCBC's ordinary shareholders, and will rank below all senior liabilities and Tier 2 capital securities of the bank in liquidation.
The securities are also subject to write-off at a point of non-viability as determined by the Monetary Authority of Singapore (MAS). The amount to be written off will be as much as is required for the bank to cease to be non-viable, as determined by OCBC in consultation with MAS, or as directed by MAS, up to the full principal and dividend amount on the securities. The full principal and dividend amount must be written off ahead of any write-off of OCBC's Basel III Tier 2 securities.
Non-performance risk arises from OCBC's unrestricted discretion in cancelling any periodic distribution on the proposed securities. OCBC will also not be obliged to pay any distribution if it is prevented from doing so under Singapore banking regulations or other requirements of the MAS. Distribution on the securities would otherwise be made semi-annually at a fixed rate, based on the prevailing principal amount, subject to reset on the applicable reset dates.
RATING SENSITIVITIES
A change in OCBC's VR will have an impact on the securities' ratings.
OCBC's other ratings are as follows:
Long-Term Issuer Default Rating 'AA-'; Outlook Stable
Short-Term Issuer Default Rating 'F1+'
Viability Rating 'aa-'
Support Rating '1'
Support Rating Floor 'A-'
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