Deutsche Bank AG (DBK), Germany’s largest lender, was among 15 European banks that had their outlooks cut to negative by Standard & Poor’s on the prospect that governments are less likely to provide aid.
The outlooks were lowered from stable “to reflect our view that extraordinary government support is likely to diminish as regulators implement resolution frameworks,” the ratings firm said yesterday in a statement.
Financial overseers have been increasing regulations to limit a repeat of the bailouts that propped up lenders hobbled by the 2008 financial crisis. Switzerland and the U.K. are among nations that have stated their intention to use resolution powers to wind down struggling lenders in ways that limit the burdens on governments, S&P said.
The European Parliament approved a bill this month that requires 8 percent of a failing bank’s liabilities be wiped out before recourse can be made to industry-financed resolution funds and other backstops. The plan is part of an effort to make unsecured bondholders share losses when banks require bailouts.
The rules must also be passed by the EU’s 28 national governments. EU governments provided 592 billion euros ($817 billion) to support banks from October 2008 through the end of 2012, according to the European Commission.
“European authorities are taking steps to increase the resolvability of banks and require creditors rather than taxpayers to bear the burden of the costs of failure,” S&P said. Ratings could be cut if “we perceive that support for senior unsecured creditors is less predictable under the new legislative framework.”
Deutsche Bank’s rating at S&P was cut in July to A, the sixth-highest of 10 investment grade levels. Barclays and Zurich-based Credit Suisse were lowered that month to A- as S&P said new rules and “uncertain market conditions” threaten their business.
Renee Calabro at Frankfurt-based Deutsche Bank, Credit Suisse’s Eva Radtke, Barclays’s Kerrie Cohen and Karina Byrne at Zurich-based UBS had no immediate comment. Standard & Poor’s has scheduled a conference call for 2 p.m. London time to discuss the credit grades.
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