September 1, 2017 / 2:38 AM / a year ago

Fitch Assigns MUFG's Euro Senior Unsecured Notes 'A' Rating

(The following statement was released by the rating agency) TOKYO, August 31 (Fitch) Fitch Ratings has assigned Japan-based Mitsubishi UFJ Financial Group, Inc.'s (MUFG, A/Stable) EUR750 million senior unsecured notes a rating of 'A'. The notes are likely to be issued on 7 September 2017 and are expected to count towards MUFG's total loss-absorbing capacity (TLAC) requirements, which have been set by the Financial Stability Board at 16% of risk-weighted assets for global systemically important banks (G-SIBs) like MUFG, effective 1 January 2019. Fitch believes MUFG will meet its minimum requirement for TLAC by the 2019 deadline through managed growth, earnings retention and issuance of TLAC-eligible securities. In addition to the TLAC minimum requirement, MUFG's total buffer requirement is 20% by end-March 2019 and 22% by end-March 2022, including a 2.5% capital conservation buffer and a 1.5% G-SIB buffer, which the rating agency believes MUFG will meet. The senior bonds will constitute direct, unconditional, unsecured and unsubordinated general obligations of MUFG, and rank pari passu without any preference among themselves and with all of its other unsecured debt, other than subordinated debt and except for statutorily preferred debt. The notes will be structurally subordinated to the liabilities of MUFG's subsidiaries, including Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU; A/Stable) and Mitsubishi UFJ Trust and Banking Corporation (MUTB; A/Stable). The proceeds will be distributed fully to the operating subsidiaries as obligations that rank pari passu with other senior unsecured obligations of the operating subsidiaries. KEY RATING DRIVERS The rating on the notes is aligned with the Long-Term Issuer Default Rating (IDR) of MUFG, in line with Fitch's criteria. MUFG's IDR is based on its Viability Rating (VR) of 'a', which reflects the banking group's strong and very sound domestic franchises, solid liquidity profiles in yen, sound asset quality, adequate capital positions, and modest profitability. The rating also takes into consideration MUFG's efforts to trim its investment portfolio to reduce volatility in earnings and capitalisation, which counter the bank's rising appetite for risk outside Japan. Despite their structural subordination features, Fitch aligns MUFG's holding company senior debt ratings with the IDR and VR of MUFG's operating companies. This equalisation reflects Fitch's view that the holding company's failure and senior level default risk are similar to its wholly owned operating banks. This is due to consolidated supervision with all entities being eligible for pre-emptive state support, group interconnectedness and low holding-company double leverage. RATING SENSITIVITIES The rating on the senior unsecured notes issued by MUFG would be directly affected by a change in MUFG's IDRs, which would stem from a change in its VR. However, the rating would also be underpinned by its 'A-' Support Rating Floor. Negative action could also stem from an unexpected change in the regulatory framework that affects our equalisation approach of holding company and operating company ratings and clearly and significantly raises the loss severity of the notes relative to other senior unsecured debt. Contact: Primary Analyst Naoki Morimura Director +81 3 3288 2686 Fitch Ratings Japan Limited Kojimachi Crystal City East Wing 3F 4-8 Kojimachi, Chiyoda-ku, Tokyo102-0083 Secondary Analyst Kaori Nishizawa Director +81 3 3288 2783 Committee Chairperson Jonathan Cornish Managing Director +85 2 2263 9901 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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