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(Bloomberg) -- Six European banks, including Credit Suisse Group AG and HSBC Holdings Plc, had their ratings cut by Standard & Poor’s on the prospect that governments are less likely to provide aid in a crisis.
Barclays Plc, Lloyds Banking Group Plc also had the long- term ratings on their non-operating holding companies reduced, the ratings company said in a statement Tuesday.
Standard Chartered Plc and Royal Bank of Scotland Group Plc had both their long-term and short-term ratings lowered. Deutsche Bank AG was among other banks in Germany and Austria that may have their credit ratings lowered, S&P said today.
The EU enacted the bank-resolution law last year in a bid to end taxpayer bailouts that prevailed in the financial crisis. The bloc granted 661 billion euros ($758 billion) for recapitalization and asset-relief measures from 2008 to 2013, according to European Commission data.
Under the new rules, authorities will, as a general rule, require 8 percent of a struggling bank’s liabilities to be wiped out before recourse can be made to industry funds or taxpayer support. Member states had to transpose the directive into national law by the end of 2014 and have until Jan. 1, 2016 to apply all rules.
Austria, Germany and the U.K. introduced powers a year earlier than required to force losses on bondholders. S&P said today it’s uncertain whether the Swiss government would provide support to creditors of non-operating bank holdings companies.
S&P’s credit ratings assign a default probability that combines a bank’s stand-alone strength with the likelihood that it will get support from the state or from other sources in times of crisis. The uplift from state support is what could be lowered in S&P’s review. Moody’s Investors Service and Fitch Ratings have a similar debt rating structure.
As the EU’s bail-in law became effective, S&P said last April it expected to reclassify the likelihood it assigns to government support for systemically important banks in 31 European countries -- the EU’s 28 members plus Switzerland, Norway and Liechtenstein. It would most likely move to a “support uncertain” label from the current “supportive” verdict, and reduce or remove the rating uplift linked to the expectation of government support.
--With assistance from Ben Moshinsky in London.
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