OREANDA-NEWS. Fitch Ratings has affirmed Barclays Bank plc's Long-term Issuer Default Rating (IDR) and senior debt ratings at 'A', Short-term IDR and debt ratings at 'F1' and its Viability Rating (VR) at 'a'. The Outlook on the Long-term IDR is Stable. At the same time, Fitch has affirmed the ratings of Barclays plc, the bank's holding company. A full list of rating actions is available at the end of this rating action commentary.

The rating actions have been taken in conjunction with Fitch's periodic review of the Global Trading and Universal Banks (GTUB), which comprises 12 large and globally active banking groups. Fitch's outlook for the GTUBs is stable as we expect the stable outlook for the groups' commercial banking and wealth and asset management businesses in 2016 to mitigate pressure on earnings from capital markets activities, particularly in fixed income trading.

As globally active universal banks, the 12 GTUBs are among the most affected by evolving regulation, which is bringing capital and resource constraints to some businesses. This means that business models are being adjusted. Specific changes and their timing vary by bank. In the medium term, we believe that the GTUBs with the strongest franchises in their core businesses, sound business models and clear strategies are best placed in this environment, and these company profiles are an important rating factor many of the GTUBs.

KEY RATING DRIVERS
IDRS, VR AND SENIOR DEBT
Barclays Bank's IDRs and senior debt rating are driven by the bank's standalone strength as reflected in its VR. Barclays Bank's company profile remains a key driver of its VR. Fitch expects that the bank's sound position in domestic retail and corporate banking and its strong credit card franchise provide Barclays Bank with sound and stable earnings sources that mitigate the weaker and, in our opinion, more volatile earnings of its investment bank and the drag on performance from the group's non-core assets in the Barclays Non-Core (BNC) unit.

In 9M15, the group's core businesses achieved adequate operating performance, helped by a sound performance in 1H15 and by the benign operating environment for retail and commercial banking in the UK and US, strong revenues in underwriting and advisory and savings from strategic cost-cutting programmes. The group continues to concentrate on improving cost efficiency as it aims to achieve a cost-income ratio in the mid-50s in the long run. However, Barclays recently revised its 2016 cost target upwards to incorporate costs associated with implementing structural reform in the UK and US.

Barclays Bank's earnings continue to be weighed down by the non-core businesses and misconduct and litigation costs. In 9M15, provisions for UK customer redress, regulatory fines, civil lawsuit and other litigation rose to GBP2.4bn from GBP1.4bn in 9M14, and we expect material further misconduct costs as the group works through legacy cases. Barclays also incurred losses on BNC business disposals, on top of operating losses of the unit, which we believe will continue as the group accelerates the run-down of BNC towards the GBP20bn 2017 risk-weighted assets (RWA) guidance.

The VR also reflects Fitch's expectation that Barclays will continue to strengthen its capitalisation further from its end-3Q15 11.1% common equity tier 1 (CET1) ratio and maintain a buffer of about 150bp above the regulatory minimum, which currently suggests an end-state CET1 ratio just above 12%. The group improved its regulatory leverage ratio to 4.2% at end-3Q15, which is broadly in line with its European peers, from 3.7% at end-2014. We expect the group to be able to meet regulatory capital requirements comfortably, primarily through retained profits and efficient use of RWAs, helped by reduced RWAs in its BNC unit.

The VR incorporates Fitch's expectation that the bank's risk appetite will remain moderate although the bank's capital markets activities in the investment bank division will remain sizeable. The bank has seen material senior management turnover in the past 18 months, but we believe that it will continue to concentrate on its core businesses and not increase its risk appetite materially by expanding its capital markets businesses.

The Stable Outlook is based on Fitch's expectation that improved core profitability will allow the group to absorb further costs related to conduct and business restructuring and to maintain adequate capitalisation.

SUPPORT RATING AND SUPPORT RATING FLOOR
Barclays Bank's and Barclays plc's SRs and SRFs reflect Fitch's view that senior creditors of the bank and the holding company cannot rely on extraordinary support from the sovereign in the event that Barclays Bank becomes non-viable. In our opinion, the UK has implemented legislation and regulations that are sufficiently progressed to provide a framework that is likely to require senior creditors participating in losses for resolving even large banking groups.

HOLDING COMPANY
Barclays plc's IDRs and VR are equalised with those of Barclays Bank, and reflect Barclays plc's role as the bank holding company and the absence of double leverage at the holding company level. The holding company has issued increasing volumes of debt, including hybrid additional tier 1 instruments, tier 2 and senior debt. Debt issued by the holding company is down-streamed to the operating company as mirror instruments, and we expect double leverage at the holding company to remain well-managed.

We expect senior debt issued by the holding company to become eligible for the proposed total loss-absorbing capacity (TLAC) requirements, but only if internally down-streamed senior debt is contractually rendered junior to the operating companies' senior obligations, which may occur by 2019 or earlier to meet future regulatory requirements.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
Subordinated debt and other hybrid capital issued by Barclays Bank and Barclays plc are all notched down from their respective VRs in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles, which vary considerably.

Subordinated lower Tier 2 debt is rated one notch below the VR for loss severity, reflecting below-average recoveries.

Upper Tier 2 instruments are rated three notches below the VR, including one notch for loss severity and two notches for incremental non-performance risk reflecting cumulative coupon deferral.

High trigger contingent capital Tier 2 notes are rated four notches below the VR. The notes are notched down twice for loss severity, reflecting loss absorption if the bank breaches a 7% CET1 ratio. In addition, they are notched down twice for non-performance risk.

Barclays' high-trigger contingent capital Tier 1 instruments and its preference shares with no constraints on coupon omission are rated five notches below the VR. The issues are notched down twice for loss severity, reflecting poor recoveries as the instruments can be converted to equity or written down well ahead of resolution. In addition, they are notched down three times for very high non-performance risk, reflecting fully discretionary coupon omission.

Other legacy Tier 1 securities are rated four notches below the VR, comprising two notches for high loss severity relative to average recoveries, and two further notches for non-performance risk, reflecting that coupon omission is not fully discretionary.

RATING SENSITIVITIES
IDRS, NATIONAL RATINGS AND SENIOR DEBT
Barclays Bank's IDRs, VRs and senior debt ratings are primarily sensitive to the bank's progress in meeting its performance targets, as the ratings rely on our expectation that the bank's core profitability will be sufficient to absorb non-core and misconduct costs. We expect the group to reduce the drag on overall performance from BNC, and failure to reduce exposure in a timely and controlled manner, leading to persistently weaker profitability and capital ratios, could put ratings under pressure.

Upside potential for Barclays Bank's VR is limited in the medium term unless the bank shows sustainable improvement in earnings that results in a materially stronger capacity to generate capital through earnings.

The ratings would also come under pressure if the bank increases its risk appetite materially, particularly in the investment bank division, which we currently do not expect. Downward pressure could also arise if the bank's capital markets franchise is damaged to the extent that it affects the business model.

The ratings are also sensitive to the bank's ability to achieve its target CET1 and leverage ratios. Fitch expects further conduct costs and non-core losses to be absorbed by operating profit without affecting the group's ability to strengthen capitalisation in line with plan.

The group's structure is evolving as it will be required to establish an intermediate holding company in the US and create a ring-fenced bank in the UK. The creation of separately capitalised and ring-fenced legal entities within the group could result in rating differentiation between the legal entities over time.

The group has significant layers of subordinated debt and hybrid capital instruments, which Fitch, however, does not consider large enough to provide sufficient protection of senior creditors to warrant assigning a Long-term IDR above its VR under Fitch's criteria. Barclays Bank's IDR could be upgraded one notch above its VR if debt issued by the holding company and Barclays Bank's own external junior debt provide greater protection for senior creditors of Barclays Bank. Because external senior debt issued by the holding company is currently down-streamed as senior debt to Barclays Bank, it ranks pari passu with Barclays Bank's external senior debt and thus does not afford protection to it.

SUPPORT RATING AND SUPPORT RATING FLOOR
An upgrade of Barclays Bank's SR and upward revision of its SRF would be contingent on a positive change in the sovereign's propensity to support its banks, which we do not expect.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
Subordinated debt and other hybrid capital ratings are primarily sensitive to changes in the VRs of Barclays Bank plc and Barclays plc. The securities' ratings are also sensitive to a change in their notching, which could arise if Fitch changes its assessment of the probability of their non-performance relative to the risk captured in the issuers' VRs. This may reflect a change in capital management in the group or an unexpected shift in regulatory buffer requirements, for example.

HOLDING COMPANY
Barclays plc's Long-term IDR is driven by its VR, which in turn is equalised with Barclays Bank's VR and is therefore primarily sensitive to the same drivers as Barclays Bank's VR.

Together with the creation of separately capitalised subsidiaries, over time further expected debt issuance by Barclays plc could change the relative position of creditors of different group entities, which would be reflected in different entity ratings, including the holding company's VR, IDR and debt ratings. Fitch could notch the holding company's IDRs and VR below Barclays Bank's ratings if double leverage at Barclays plc increases above 120% or if the role of the holding company changes, both of which we do not expect.

The rating actions are as follows:

Barclays Bank
Long-term IDR: affirmed at 'A'; Outlook Stable
Short-term IDR: affirmed at 'F1'
Viability Rating: affirmed at 'a'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'
Senior unsecured debt, including programme ratings: affirmed at 'A'/ 'F1'
Commercial paper: affirmed at 'F1'
Market-linked senior securities: affirmed at 'Aemr'
Government-guaranteed senior long-term debt: affirmed at 'AA+'
Lower Tier 2 debt: affirmed at 'A-'
Upper Tier 2 debt: affirmed at 'BBB'
Additional Tier 1 instruments: affirmed at 'BB+'
Preference shares with no constraints on coupon omission: affirmed at 'BB+'
Other hybrid Tier 1 instruments: affirmed at 'BBB-'
Tier 2 contingent capital notes: affirmed at 'BBB-'
The rating actions have no impact on the ratings of the outstanding covered bonds issued by Barclays Bank

Barclays plc
Long-term IDR: affirmed at 'A'; Outlook Stable
Short-term IDR: affirmed at 'F1'
Viability Rating: affirmed at 'a'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'
Senior debt including programme ratings: affirmed at 'A'/'F1'
Commercial paper: affirmed at 'F1'
Tier 2 instruments: affirmed at 'A-'
Basel III compliant Additional Tier 1 instruments: affirmed at 'BB+'

Barclays US CCP Funding LLC
US repo notes programme: affirmed at 'F1'