(The following statement was released by the rating agency)
LONDON/MOSCOW, July 17 (Fitch) Fitch Ratings has assigned Russian Standard
Bank's (RSB; B+/Stable/b+) 'new style' subordinated debt issue with write-off
features a final long-term rating of 'B'/'RR5'. The bonds have a coupon of 11.5%
payable semi-annually, mature in January 2024 and are callable in January 2019.
KEY RATING DRIVERS
RSB's 'new style' Tier 2 subordinated debt issue has been rated one notch lower
than the bank's Viability Rating (VR). This includes (i) zero notches for
additional non-performance risk relative to the VR, as Fitch believes these
instruments should only absorb losses once a bank reaches, or is very close to,
the point of non-viability; and (ii) one notch for loss severity, (one notch,
rather than two, as these issues will not be deeply subordinated, and will
actually rank pari passu with 'old style' subordinated debt in case of a
The issue will have coupon/principal write-down features, which in accordance
with recently adopted Russian legislation, will be triggered if: (i) the bank's
core Tier 1 capital adequacy ratio decreases below 2%; or (ii) bankruptcy
prevention measures are introduced in respect to the bank by the Deposit
Insurance Agency. The latter is possible as soon as a bank breaches any of its
mandatory capital ratios or is in breach of certain other liquidity and capital
For more details on Fitch's approach on rating subordinated debt issues of
Russian banks see 'Implementation of New Capital Rules in Russia: Moderately
Positive, Unlikely to Lead to Rating Changes' dated 19 April 2013 at
The issue's rating is linked to the bank's VR and would therefore likely be
upgraded or downgraded following similar action on the VR.
Downward pressure on RSB's VR, and consequently the issue's ratings, could stem
from (i) a further material increase of contingent risks or weakening of
capitalisation as a result of the shareholder acquisition of CEDC; (ii) a
significant liquidity squeeze; or (iii) significant asset quality deterioration,
driven for example by a marked downturn of operating environment.
The gradual rebuilding of the bank's capitalisation, along with moderation of
group risks could result in an upgrade of RSB's VR and the issue ratings. For
more information on RSB's rating sensitivities see 'Fitch Upgrades Two and
Affirms Three Russian Consumer Finance Banks' dated 21 March 2013 at
+7 495 956 5576
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Valovaya Str, 26
+7 495 956 9978
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Additional information is available at www.fitchratings.com.
Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 15
August 2012, 'Assessing and Rating Bank Subordinated and Hybrid Securities',
dated 5 December 2012, are available at www.fitchratings.com.
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Assessing and Rating Bank Subordinated and Hybrid Securities
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