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Fitch Rates BPCE S.A.'s Senior Non-Preferred Notes 'A'
December 22, 2016 / 9:21 AM / a year ago

Fitch Rates BPCE S.A.'s Senior Non-Preferred Notes 'A'

(The following statement was released by the rating agency) PARIS, December 22 (Fitch) Fitch Ratings has assigned BPCE S.A.'s senior non-preferred notes to be issued under the bank's EUR40bn euro medium-term note (EMTN) programme an 'A' long-term rating. The introduction of this new debt class does not affect the 'A' long-term rating on the bank's outstanding senior debt which, following legislative changes in France, becomes preferred senior debt. Under its criteria, Fitch requires a high burden of proof to notch senior debt up or down a bank's Issuer Default Rating (IDR) based on recovery prospects, particularly at high rating levels. This is because the structure of a bank's balance sheet is likely to be very different at the point of failure and that default is unlikely to result in liquidation for systemically important banks. Additionally, Fitch believes the difference in default risk between the preferred and non-preferred senior debt will initially be very small until the bank has larger buffers of non-preferred senior and junior debt. Over time, a build-up of senior non-preferred notes in combination with Groupe BPCE's already fairly significant qualifying junior debt (around 6% of risk-weighted assets at end-June 2016), could result in a level of protection for senior preferred notes warranting a long-term rating one notch higher than the bank's Long-Term IDR and non-preferred senior debt ratings. For the senior preferred notes to achieve a one notch uplift, the buffer of qualifying junior debt and non-preferred senior debt would need to exceed our estimate of a 'recapitalisation amount'. This amount is likely to be around or above the bank's minimum pillar 1 total capital requirement. It should be noted that there is no assurance that all the notes issued under the programme will be assigned a rating. KEY RATING DRIVERS The senior non-preferred notes to be issued under BPCE S.A.'s EMTN programme are rated in line with BPCE S.A.'s Long-Term IDR (A/Stable) and existing senior debt ratings. Fitch views the likelihood of default on the senior non-preferred notes as the same as the likelihood of default of the bank. BPCE S.A.'s ratings are the same as Groupe BPCE's (A/Stable), based on the group's cross-support mechanism. Non-preferred senior debt constitutes a new senior debt class under French law, following the amendment of the French Financial and Monetary Code relating to ranking of banks' obligations in a liquidation procedure. In accordance with article L.613-30-3-I-4 of the code, non-preferred senior obligations are senior to subordinated debt and subordinated to existing senior debt, which becomes preferred senior debt and continues to rank in line with certain other senior liabilities. The new senior non-preferred notes will be bailed in before preferred senior debt in the event of resolution under the EU's Bank Recovery and Resolution Directive. RATING SENSITIVITIES The senior non-preferred notes to be issued under BPCE S.A.'s EMTN programme are primarily sensitive to a change in the Long-Term IDR of BPCE S.A., which in turn is sensitive to a change in the Long-Term IDR of Groupe BPCE. Contact: Primary Analyst Francois-Xavier Deucher, CFA Director +33 1 44 29 92 72 Fitch France S.AS 60 rue Monceau 75008 Paris Secondary Analyst Julien Grandjean Analyst +33 1 44 29 91 41 Committee Chairperson Bjorn Norrman Senior Director +44 20 3530 1330 Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email:; Elaine Bailey, London, Tel: +44 203 530 1153, 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 _id=1016923 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. 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