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05-Feb-2018
Moody’s may upgrade Ulster Bank amid new protections
The IRISH TIMES (Online)
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Rules designed to lower likelihood of essential banking services being put at risk
Moody’s said on Monday that it has placed its credit ratings on Ulster Bank Ireland on
review for an upgrade as the lender is set to be protected by new UK rules protecting retail
customers of large banking groups.
Ulster Bank’s owner, Royal Bank of Scotland (RBS), said in 2016 that it planned to ringfence
its Natwest Bank, Ulster Bank units in Northern Ireland and the Republic, Adam & Co,
and Coutts units from January 2018 - protecting customers and day-to-day banking services
in these businesses from unrelated risks elsewhere in the RBS group and shocks affecting
the wider financial system.
The UK rules are designed to lower the likelihood of essential banking services used by
ordinary depositors from being put at risk by a failure of other parts of large banks, such as
their investment banking activities.
Moody’s said that the development has prompted it to place its Baa2 long-term deposit
rating and Baa3 long-term issuer rating for Ulster Bank on review for an upgrade. A Baa2
grade is eight levels below Moody’s top-notch Aaa rating.
“The review on the ratings of [Ulster Bank Ireland], which is incorporated in the Republic of
Ireland, was driven by Moody’s expectation that [THE BANK]will remain an integral part of
the ring-fenced banking subgroup, which will have a stronger credit profile as it will retain
mostly retail and SME (small- to medium-sized enterprise) activities, and have a more
deposit-based funding profile,” Moody’s said.
Last week, Moody’s put its ratings for the RBS group on review for a downgrade as a result
of the new legal structure of the organisation.