TEXT-Fitch: Support is key to German Pfandbrief issuers' ratings
(The following statement was released by the rating agency)
Aug 28 - Fitch Ratings believes that state support for German Pfandbrief issuers is likely to remain strong for now under most reasonable scenarios, and the banks' ratings and Stable Outlooks continue to benefit from this assumption.
Fitch's Issuer Default Ratings for the following independent German Pfandbrief issuers are at their Support Rating Floors: Aareal Bank AG ('A-'/'F1'/'bbb'), Deutsche Pfandbriefbank AG ('A-'/'F1'/'bb'), Corealcredit Bank AG ('BBB-'/'F3'/'bb') and Duesseldorfer Hypothekenbank AG ('BBB-'/'F3'/'c'). Fitch's Viability Ratings show where these banks would be rated if Fitch did not factor in the likelihood of support.
However, Fitch is also cautious that Germany's Restructuring Act and the European Commission's resolution proposal are important steps on the road to predictable and operational bank restructuring, which could become a workable alternative to ongoing external support. Fitch's view on support is sensitive to these developments and the changing attitude of the German authorities towards using such tools.
"The German authorities, in some cases in co-operation with the Deposit Protection Fund of German Banks (DPF), have provided support in times of stress to specific Pfandbrief issuers to ensure that the robustness of the product has not had to be put to the test," says Michael Dawson-Kropf, Senior Director in Fitch's Financial Institutions group. "However, the medium- to long-term consequences of the financial crisis and the resulting changes to the regulatory environment may eventually alter the authorities' assumption that support for the Pfandbrief always needs extend to their issuers."
The importance of broad systemic support for banks in Germany is compounded by the fact that the long-term viability of some specialised commercial real estate and public-sector lenders is still far from certain. Some banks' business models now centre on leveraging the Pfandbrief product while closing the unsecured funding gap with deposits from retail and institutional investors backed by the DPF.
For more information, see " Support is Key to German Pfandbrief Issuers' Ratings", dated 28 August 2012 at www.fitchratings.com.
Link to Fitch Ratings' Report: Support is Key to Pfandbrief Issuers' Ratings
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