Swedish banks look set to make early, sizeable issuances of Additional Tier 1 contingent capital securities (AT1securities), which is credit positive for the banks and their creditors, owing to Sweden’s (Aaa stable) early phase-in of increased capital requirements, says Moody’s Investors Service. AT1 securities will strengthen large Swedish banks’ ability to absorb losses before the point of non-viability or bank failure and the rating agency estimates further AT1 security issuance of $2.0 to $2.9 billion by 2016, which will build up to $4.9 billion by 2019. Svenska Handelsbanken and Swedbank are no longer eligible under Basel III’s stricter capital definitions, according to Moody`s.
Positive for Swedish Banks
The new report «Additional Tier 1 Contingent Capital Securities: Early implementation of increased capital requirements motivates Swedish banks to make early, large issuances», is now available on www.moodys.com. «The issuance of AT1 securities is credit positive for Swedish banks and their creditors, because they will boost the banks’ loss-absorbing capital, replace legacy instruments that have less clearly defined loss-absorption features; and increase the possibility that banks can continue to operate as a going concern,» says Oscar Heemskerk, an Associate Managing Director in Moody’s EMEA Financial Institutions Group to Nordic News.
Sweden adopts Basel Rules
-We believe AT1 securities will be attractive for Swedish banks because Sweden adopted close to fully-loaded Basel III rules from 2014, ahead of most other European nations and well ahead of the mandated introduction schedule that allows a gradual move to Basel III by 2019″, adds Daniel Forssen, a Moody’s Associate Analyst and co-author of the report. Moody’s report says that other two large Swedish banks, Svenska Handelsbanken AB (Aa3 negative, C stable/a3) and Swedbank AB (A1 negative, C-stable/baa1), are likely to issue AT1 securities over the next few years as they replace traditional Tier I instruments that are no longer eligible under Basel III’s stricter capital definitions. Moody`s write in the press release that r\the publication does not announce a credit rating action. For any credit ratings referenced in Moody`s publication, please go to www.moodys.com for the most updated credit rating action information and rating history, reports Nordic-news.com.
