Fitch Places Various APAC Banks' Short-Term Ratings Under Criteria Observation

Bank of Kaohsiung

07/05/2019 11:02

(The following statement was released by the rating agency)


Fitch Ratings-Taipei/Sydney/Hong Kong-May 07: Fitch Ratings has placed 17 
Short-Term Foreign-Currency Issuer Default Ratings (ST IDRs) and, where 
assigned, the Short-Term Local-Currency IDRs of 12 APAC-based banking groups 
Under Criteria Observation (UCO) following the publication of its cross-sector 
Short-Term Ratings Criteria on 2 May 2019. Related short-term debt ratings were 
also placed UCO. 

Fitch intends to conclude full implementation of the criteria, and resolution of 
all UCO designations within six months of the designation.

A full list of rating actions is at the end of this rating action commentary. 

KEY RATING DRIVERS

The short-term ratings of the banks are determined primarily by correspondence 
tables, linking short-term to long-term ratings. The new Short-Term Ratings 
Criteria introduced changes to our correspondence table between long- and 
short-term ratings. Two new cusp points at 'A' and 'BBB+' have been added to the 
existing three cusp points (A+, A- and BBB), where baseline or higher short-term 
ratings can be assigned. In addition, the criteria distinguish between ratings 
driven by the banks' standalone credit profiles and those driven by support.

Fitch uses the funding and liquidity factor score as the principal determinant 
of whether the baseline or higher ST IDR is assigned to each cusp point for 
banks with Long-Term IDRs driven by their standalone credit profiles, as 
reflected by their respective Viability Rating (VR). 

The ST IDRs and debt ratings of four banking groups that have VR-driven IDRs 
(Heartland Bank Limited (HBL), Southland Building Society, TSB Bank Limited and 
The Shanghai Commercial & Savings Bank, Ltd.) are UCO as the ratings could be 
downgraded by one notch under the new criteria. This is because the latest 
funding and liquidity scores that feed into their VRs are below the minimum 
level required to maintain their short-term ratings under the new criteria. The 
ST IDRs of Heartland Group Holdings Limited, the non-operating holding company 
of HBL, were also placed UCO as the holding company ratings are aligned with 
those of its bank subsidiary. Fitch will review each bank's funding and 
liquidity score when resolving the UCOs as the scores are the principal 
determinant of their short-term rating levels. 

The higher of the two possible ST IDRs for banks with support-driven Long-Term 
IDRs will typically be assigned where the issuer is rated lower than the 
supporting entity. However, Fitch will take into account factors such as 
wrong-way risk - simultaneous deterioration in the liquidity profiles of both 
the sovereign and the bank - for ratings driven by sovereign support and whether 
there are any other potential impediments to the prompt flow of funds when 
determining whether to assign the baseline or higher short-term ratings.

The ST IDRs of eight banking groups with sovereign support-driven Long-Term IDRs 
(Agricultural Bank of China Limited, Bank of China Limited, Bank of 
Communications Co., Ltd., China Construction Bank Corporation, Industrial and 
Commercial Bank of China Limited, Bank of Kaohsiung Co., Ltd., Taiwan 
Cooperative Bills Finance Corporation, and Export-Import Bank of Thailand) are 
UCO.

This is because the eight banking groups could be upgraded by one notch under 
the new criteria unless Fitch believes that the potential for simultaneous 
deterioration in the liquidity profile of both the sovereign and the bank is 
significant or there are other potential impediments to the prompt flow of 
funds. The short-term IDRs and debt ratings of certain of their bank 
subsidiaries were also placed UCO, where relevant.

The ratings listed below represent the bank ratings in APAC that could 
potentially be impacted by the changes in the new criteria. However, not all of 
the ratings placed UCO will necessarily experience changes.

RATING SENSITIVITIES

The key rating sensitivity with respect to the resolution of the UCO status will 
be Fitch's completion of its analytical work reviewing the ST IDR elements under 
its new criteria.

The short-term ratings under UCO for banks with VR-driven IDRs are primarily 
sensitive to any change in the level of the latest funding and liquidity scores 
that feed into their VRs. Fitch will review these prior to resolving the UCO 
status. The short-term ratings of HBL, Southland Building Society, TSB Bank 
Limited and The Shanghai Commercial & Savings Bank, Ltd. and their affiliates 
will be downgraded by one notch unless there is an upward revision to existing 
funding and liquidity scores, all else being equal. 

The short-term ratings of Agricultural Bank of China Limited, Bank of China 
Limited, Bank of Communications Co., Ltd., China Construction Bank Corporation, 
Industrial and Commercial Bank of China Limited, Bank of Kaohsiung Co., Ltd., 
Taiwan Cooperative Bills Finance Corporation, and Export-Import Bank of 
Thailand, and their bank affiliates, if any, could be upgraded by one notch 
unless Fitch believes that the potential for simultaneous deterioration in the 
liquidity profile of both the sovereign and the bank is significant or there are 
other potential impediments to the prompt flow of funds.

Existing rating sensitivities for each rating defined in the latest published 
rating action commentaries on each issuer continue to apply to and are available 
at www.fitchratings.com. However, any existing rating sensitivities related to 
ST IDR generally are subject to change when Fitch resolves the UCO status. 

  

The following entity and debt ratings have been placed UCO:

Heartland Group Holdings Limited

Short-Term Foreign- and Local-Currency IDRs of 'F2' placed UCO

Heartland Bank Limited

Short-Term Foreign- and Local-Currency IDRs and short-term debt programme rating 
of 'F2' placed UCO

Southland Building Society

Short-Term Foreign- and Local-Currency IDRs and short-term debt programme rating 
of 'F2' placed UCO

TSB Bank Limited

Short-Term Foreign- and Local-Currency IDRs and short-term debt programme rating 
of 'F1' placed UCO

Agricultural Bank of China Limited

Short-Term Foreign-Currency IDR and short-term debt programme rating of 'F1' 
placed UCO

Inventive Global Investments Limited	

Short-term debt programme rating of 'F1' placed UCO

Bank of China Limited

Short-Term Foreign- and Local-Currency IDRs and short-term debt programme rating 
of 'F1' placed UCO

Bank of China (Hong Kong) Limited

Short-Term Foreign-Currency IDR of 'F1' placed UCO

Tai Fung Bank Limited

Short-Term Foreign-Currency IDR of 'F2' placed UCO

Bank of Communications Co., Ltd.

Short-Term Foreign-Currency IDR and short-term debt programme rating of 'F1' 
placed UCO

China Construction Bank Corporation

Short-Term Foreign- and Local-Currency IDRs of 'F1' placed UCO

China Construction Bank (Asia) Corporation Limited

Short-Term Foreign-Currency IDR and short-term debt programme rating of 'F1' 
placed UCO

Industrial and Commercial Bank of China Limited

Short-Term Foreign-Currency IDR of 'F1' placed UCO

Industrial and Commercial Bank of China (Macau) Limited

Short-Term Foreign-Currency IDR of 'F1' placed UCO

Bank of Kaohsiung Co., Ltd. 

Short-Term Foreign-Currency IDR of 'F2' placed UCO

Taiwan Cooperative Bills Finance Corporation	

Short-Term Foreign-Currency IDR of 'F1' placed UCO

The Shanghai Commercial & Savings Bank, Ltd.

Short-Term Foreign-Currency IDR of 'F1' placed UCO

Export-Import Bank of Thailand

Short-Term Foreign-Currency IDR of 'F2' placed UCO

Contact: 

Primary Analysts

Tim Roche (Southland Building Society, TSB Bank Limited)

Senior Director

+61 8256 0310

Fitch Ratings Australia Pty Ltd

Level 15, 77 King Street, Sydney NSW 2000

Jack Do (Heartland Bank Limited, Heartland Group Holdings Limited)

Director

+61 8256 0355

Grace Wu (Agricultural Bank of China Limited, Bank of Communications Co., Ltd., 
Industrial and Commercial Bank of China Limited)

Senior Director

+852 2263 9919

Katie Chen (Bank of China Limited, China Construction Bank Corporation)

Director

+886 2 8175 7614

Savio Fan (Bank of China (Hong Kong) Limited, China Construction Bank (Asia) 
Corporation Limited, Industrial and Commercial Bank of China (Macau) Limited, 
Tai Fung Bank Limited) 

Associate Director

+852 2263 9955

Cherry Huang (The Shanghai Commercial & Savings Bank, Ltd., Taiwan Cooperative 
Bills Finance Corporation)

Director

+886 2 8175 7603

Sophia Chen (Bank of Kaohsiung Co., Ltd.) 

Director

+886 2 8175 7604

Ambreesh Srivastava (Export-Import Bank of Thailand)

Senior Director

+65 6796 7218 

Secondary Analysts

Tim Roche (Heartland Bank Limited, Heartland Group Holdings Limited)

Senior Director

+61 8256 0310

Jack Do (Southland Building Society, TSB Bank Limited)

Director

+61 8256 0355

Grace Wu (Bank of China Limited, China Construction Bank Corporation, Bank of 
China (Hong Kong) Limited, China Construction Bank (Asia) Corporation Limited, 
Industrial and Commercial Bank of China (Macau) Limited, Tai Fung Bank Limited) 

Senior Director

+852 2263 9919

Elaine Xu (Agricultural Bank of China Limited, Bank of Communications Co., Ltd., 
Industrial and Commercial Bank of China Limited)

Associate Director

+86 21 6898 7993

Cherry Huang (Bank of Kaohsiung Co., Ltd.) 

Director

+886 2 8175 7603

Sophia Chen (The Shanghai Commercial & Savings Bank, Ltd.) 

Director

+886 2 8175 7604

Janet Lu (Taiwan Cooperative Bills Finance Corporation) 

Associate Director

+886 2 8175 7613

Thanasit Utamaphethai (Export-Import Bank of Thailand)

Associate Director

+66 2108 0154

Committee Chairperson

Jonathan Cornish

Managing Director

+852 2263 9901

Media Relations: Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: 
peter.hoflich@thefitchgroup.com; Yee Man Ko, Hong Kong, Tel: +852 2263 9953, 
Email: alanis.ko@thefitchgroup.com; Leslie Tan, Singapore, Tel: +65 6796 7234, 
Email: leslie.tan@thefitchgroup.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 
9935, Email: wailun.wan@thefitchgroup.com.

Additional information is available on www.fitchratings.com

Applicable Criteria 

Bank Rating Criteria (pub. 12 Oct 2018)

https://www.fitchratings.com/site/re/10044408

Short-Term Ratings Criteria (pub. 02 May 2019)

https://www.fitchratings.com/site/re/10073011

Additional Disclosures 

Solicitation Status 

https://www.fitchratings.com/site/pr/10074585#solicitation

Endorsement Policy 

https://www.fitchratings.com/regulatory

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