Various Actions Taken On Spanish Midsize Banks Amid Progress On Resolvability

We understand authorities' preferred resolution route for midsize Spanish banks is the full sale of their business. We have gained visibility on this resolution path and are more confident that it could be a credible and effective approach if implemented well, provided banks complete the build-up of their minimum requirement for own funds and eligible liabilities (MREL) buffers. Recognizing the resolution strategy as effective implies that certain senior liabilities, namely those legally excluded from bail-in, may be protected from default during a resolution process. It also reflects that bail-inable senior unsecured liabilities could face a lower default risk if banks have a large enough cushion of subordinated instruments that could absorb losses when the bank reaches the point of nonviability.

...- We understand authorities' preferred resolution route for midsize Spanish banks is the full sale of their business. - We have gained visibility on this resolution path and are more confident that it could be a credible and effective approach if implemented well, provided banks complete the build-up of their minimum requirement for own funds and eligible liabilities (MREL) buffers. - Recognizing the resolution strategy as effective implies that certain senior liabilities, namely those legally excluded from bail-in, may be protected from default during a resolution process. It also reflects that bail-inable senior unsecured liabilities could face a lower default risk if banks have a large enough cushion of subordinated instruments that could absorb losses when the bank reaches the point of nonviability. - We assigned our long- and short-term resolution counterparty ratings (RCRs) to six Spanish banks. - We raised our long-term issuer credit rating on Bankinter S.A. to 'A-'. We affirmed...

Ratings Action