Switzerland-Based Graubuendner Kantonalbank Affirmed At 'AA+/A ...

the canton, and its well-known brand. Based on these factors, the bank also
benefits from access to low-cost unsecured funding. During the financial
markets crisis, GKB even benefited from the so-called "flight to quality",
with a material inflow of customer deposits. Our strong assessment of GKB's
liquidity reflects our view that GKB should be able to withstand market stress
without access to capital market funding for more than 12 months.
Our criteria classify GKB as a government-related entity (GRE) with an
"extremely high" likelihood of sufficient extraordinary government support,
which provides a two-notch uplift to our assessment of GKB's SACP. This view
is based on our assessment of GKB's:
• "Very important" role as Graubuenden's largest GRE. GKB's default could
destabilize the regional economy and damage the canton's reputation; and
• "Integral" link with the canton, owing to a strong and durable
relationship. GKB benefits from the canton's statutory guarantee, which
ultimately covers all of GKB's liabilities, except those of its
subsidiaries, subordinated liabilities, or nonvoting participation
certificates ("Partizipationskapital").
Outlook
Research Update: Switzerland-Based Graubuendner Kantonalbank Affirmed At 'AA+/A-1+' On Bank Criteria
Change; Outlook Stable
The stable outlook on GKB reflects that on GKB's owner and guarantor
Graubuenden. We don't expect GKB's GRE status or our view of an "extremely
high" likelihood of extraordinary government support to change in the
foreseeable future. We expect GKB to maintain a strong financial and risk
profile over the medium term.
We might revise our SACP assessment and lower our ratings on GKB if we revised
our BICRA for Switzerland, which is currently in BICRA group '1'. We would
also consider negative rating actions if we lowered the rating on the canton
or if we perceived material adverse changes in GKB's management and strategy,
including a departure from prudent capital and underwriting policies.
Moreover, a material weakening of GKB's role for or link with the canton,
including changes to the guarantee or ownership structure, could have negative
rating implications for GKB. However, if GKB's legal status or guarantee were
to change, which we currently consider unlikely, we would expect GKB's
existing obligations to be grandfathered.
Ratings upside is remote at this stage as we do not expect changes to GKB's
comparably concentrated business model. Furthermore, an upgrade would depend
on a similar rating action on the canton.
Ratings Score Snapshot
Issuer Credit Rating AA+
SACP aa-
Anchor a
Business Position Adequate (0)
Standard & Poors | RatingsDirect on the Global Credit Portal | December 5, 2011 4
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