OREANDA-NEWS. Fitch Ratings has assigned SpareBank 1 SR-Bank's (SR; A-/Stable/F2) EUR50m Tier 2 subordinated debt issue a long-term rating of 'BBB+'.

KEY RATING DRIVERS
The issue is rated one notch below SR's 'a-' Viability Rating (VR). The notching reflects the notes' higher expected loss severity relative to senior unsecured creditors. Fitch did not apply additional notching for incremental non-performance risk relative to the VR given that any loss absorption would only occur once the bank reaches the point of non-viability.

RATING SENSITIVITIES
The issue's rating is sensitive to changes in SR's VR. SR's VR is primarily sensitive to credit growth surpassing internal capital generation and materially weakening capital ratios. It is also sensitive to a significant house price correction, deterioration in commercial real estate exposures or prolonged low oil prices, which would likely lead to higher unemployment, lower private consumption and weaker corporate lending quality.

In addition, the rating of SR's Tier 2 debt issue is also sensitive to a change in Fitch's assessment of loss severity or non-performance risk.