Moody’s affirms HSBC Bank ME Limited’s ratings following announcement of its intention to move to Dubai
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Moody’s affirms HSBC Bank ME Limited’s ratings following announcement of its intention to move to Dubai Limassol, September 30, 2015 — Moody’s Investors Service has today affirmed HSBC Bank Middle East Limited (HBME)’s A2/P-1 long and short-term deposit ratings, A2 senior unsecured rating and A1(cr)/P-1(cr) Counterparty Risk Assessment. The outlook on the bank’s ratings remains stable.

This affirmation incorporates Moody’s view on HBME’s intention to move its place of incorporation and head office to the Dubai International Financial Centre (DIFC) from its current location in Jersey, UK. RATINGS RATIONALE On September, 17 HBME announced its intention to move its place of incorporation and head office to DIFC from Jersey some time in 2016, thereby also changing lead regulator, with the Dubai Financial Services Authority (DFSA) taking over from the Jersey authorities. Moody’s assessed the potential implications of such relocation and has concluded it is credit neutral.

Firstly the DIFC policies and regulations are broadly in line with international standards and the principles of the Prudential Regulation Authority in the UK, the current lead regulator of HSBC group. The DFSA will also be closer to the majority of the bank’s activities, which are primarily in the United Arab Emirates (UAE), which would facilitate the regulator’s supervisory oversight.

At the same time, Moody’s does not anticipate the change in domicile to have any incidence on the bank’s business activities, governance or financial performance. In this context, we expect HBME’s baa2 baseline credit assessment (BCA) to continue reflecting the bank’s solid profitability, good funding and liquidity metrics.

These strengths are moderated by the bank’s relatively weak but improving asset quality and its relatively low capital levels versus regional peers from the Gulf Cooperation Council (GCC). HBME’s baa2 baseline credit assessment continues to be supported by a Moderate+ macro profile score which reflects our aggregate view on the various banking environments in which HBME operates, primarily UAE, Oman and Qatar. HBME’s adjusted BCA of a2 incorporates three notches of uplift, reflecting our assessment of a very high probability of support from the bank’s parent, HSBC Holdings.

This is based on HBME’ strategic importance for the Middle East operations of the HSBC group and its strong integration within the group’s infrastructure and operations. We do not incorporate and probability of UAE systemic support. HBME’s A1(cr) Counterparty Risk Assessment is one notch above its a2 adjusted BCA and reflects our view that senior obligations represented by the CRA will be more likely preserved in order to limit contagion, minimize losses and avoid disruption of critical functions.

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