DBRS: Senior Debt of 6 German Banking Groups Downgraded by 1 Notch with New Legislation

DBRS Ratings Limited and DBRS, Inc. (collectively, DBRS) has downgraded by one notch the existing Senior Debt of 6 German banking groups (the Banks), concluding the review period. This rating action incorporates ongoing legislative changes in Germany. Following the downgrade, the affected senior debt instruments have been renamed as Senior Non-Preferred Debt. Any new debt that is issued with the same characteristics would be rated at the same level and referred to as Senior Non-Preferred Debt. In addition, a new Senior Debt rating has been assigned at the same level as the previous senior debt rating and this will apply to any new senior debt that is issued after the new legislation is effective.

The affected ratings were placed Under Review with Negative Implications on July 4, 2018 (see press release for further details). This action concludes the review period. The trends on the Banks’ affected ratings will revert back to Positive for Deutsche Pfandbriefbank AG, DZ BANK AG, Sparkassen-Finanzgruppe, Landesbank Berlin AG, Norddeutsche Landesbank Girozentrale (NORD/LB), and Negative for Deutsche Bank AG.

The rating action incorporates legislative changes in Germany, including the most recent change that harmonises the liability structure of German banks more closely with other European jurisdictions. Specifically, the amendment of Section 46f of the German Banking Act (KWG), which took effect on July 21st 2018, allows for the issuance of both lower ranking “Senior Non-Preferred Debt” as well as higher ranking “Preferred Senior Debt. The latter ranks above the senior non-preferred debt, but pari passu with existing structured notes and short-term money-market instruments.

DBRS has downgraded the ratings of the Banks’ tradeable and non-structured Senior Debt instruments, which were previously positioned at the same level as the Intrinsic Assessment (IA) (or at the Floor Rating of the Sparkassen-Finanzgruppe for its members). The instruments are designated as Senior Non-Preferred Debt and are positioned 1 notch below the IA, in line with DBRS’ approach in other European jurisdictions. The new Senior Debt Rating is at the same level as the IA and refers to the higher ranking Preferred Senior Debt instruments.

RATING DRIVERS
The ratings of the Senior Debt and Senior Non-Preferred Debt will move in line with any changes in the Intrinsic Assessments of the individual banks.

Notes:
All figures are in EUR unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (July 2018). This can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include company reports, the European Commission, SNL Financial, the German Federal Law Gazette and Company Reports. DBRS considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a twelve month period. DBRS’s outlooks and ratings are under regular surveillance.

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.

Deutsche Bank AG
Lead Analyst: Lisa Kwasnowski, Senior Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: February 25, 2015
Most Recent Rating Update: July 4, 2018
This rating is endorsed by DBRS Ratings Limited for use in the European Union.
The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

Deutsche Pfandbriefbank AG
Lead Analyst: George Yiannakis, Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: July 19, 2006
Most Recent Rating Update: July 4, 2018

DZ BANK AG Deutsche Zentral-Genossenschaftsbank
Lead Analyst: George Yiannakis, Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: May 22, 2007
Most Recent Rating Update: July 4, 2018
This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.
This rating included participation by the rated entity or any related third party. DBRS had no access to relevant internal documents for the rated entity or a related third party.

Sparkassen-Finanzgruppe
Lead Analyst: George Yiannakis, Vice President, Global Financial Institutions Group
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: January 18, 2007
Most Recent Rating Update: July 4, 2018

Landesbank Berlin AG
Lead Analyst: George Yiannakis, Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: January 22, 2007
Most Recent Rating Update: July 4, 2018

Norddeutsche Landesbank
Lead Analyst: George Yiannakis, Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: June 11, 2018
Most Recent Rating Update: July 4, 2018

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