German banks’ subordinated debt securities valued at 24 billion euros ($33 billion) were downgraded by Moody’s Investors Service on the prospect that new legislation will increase the risk of losses among debt holders.
“The new regulatory tools allow authorities to impose losses on debt holders without necessarily placing the entire bank into liquidation,” the ratings firm said yesterday in a statement. “Moody’s considers subordinated debt to be most at risk under the new law.”
Regulators and lawmakers worldwide are looking for ways to ensure that bank investors bear future losses after voters objected to using taxpayer funds to bolster financial firms. Germany’s Bank Restructuring Act was approved by the parliament on Nov. 2 and allows regulators to transfer the assets and liabilities of a failing bank while permitting the government to write down debt.
The cuts apply to 248 subordinated securities together with tranches of debt programs issued or backed by 24 banks. The average downgrade was two and a half levels, Moody’s said. The subordinated debt is unlikely to benefit from future German government support, Moody’s said.
Deutsche Bank AG, Commerzbank AG, Munich-based Bayerische Landesbank and DekaBank Deutsche Girozentrale, the fund manager for Germany’s state-owned savings banks, were among lenders whose securities were downgraded.
A voice mail left on Deutsche Bank’s 24-hour press hotline wasn’t immediately returned. Reiner Rossmann, a Commerzbank spokesman, and BayernLB’s Florian Ernst declined to comment. DekaBank spokesman Markus Weber didn’t immediately return a voice mail left after office hours.
“The regulatory tools provided by the Bank Restructuring Act are broad enough to allow the imposition of losses on senior unsecured and subordinated bondholders,” Moody’s said.
The following banks’ subordinated debt ratings were downgraded:
Bayerische Landesbank Bremer Landesbank Commerzbank AG DekaBank Deutsche Girozentrale Depfa Bank Plc Deutsche Apotheker- und Aerztebank eG Deutsche Bank AG Deutsche Hypothekenbank AG Deutsche Pfandbriefbank AG Deutsche Postbank AG DVB Bank SE DZ Bank AG Eurohypo AG HSH Nordbank AG IKB Deutsche Industriebank AG Landesbank Baden-Wuerttemberg Landesbank Berlin AG Landesbank Hessen-Thueringen Girozentrale Muenchener Hypothekenbank eG Norddeutsche Landesbank Girozentrale Sparkasse KoelnBonn UniCredit Bank AG Volkswagen Bank GmbH WestLB AG (part of an EMTN program)
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