The rating actions follow the revision of the Outlook on the Romanian sovereign rating (see ‘Fitch Revises Romania’s Outlook to Stable; Affirms at ‘BBB-‘ dated 24 March 2023.
The affirmation of BCR’s and BRD’s IDRs and Shareholder Support Ratings (SSRs) reflects Fitch’s view that the banks’ shareholders, Erste Group Bank AG (Erste, A/Stable/a) and Societe Generale S.A. (SG, A-/Stable/a-), respectively, will continue to have a strong propensity to provide support to their subsidiary banks.
“Country Ceiling Constrains Ratings: BCR’s and BRD’s Long Term IDRs remain capped by Romania’s Country Ceiling, which captures transfer and convertibility risks that may limit the ability of BCR and BRD to use the support from their parent banks. Absent of these constraints, BCR would be rated one notch below the parent and BRD would be equalised with the IDR of its parent. The Stable Outlooks on both banks mirror that on the Romanian sovereign rating,” according to Fitch officials.
They believe that Erste’s propensity to support BCR is high, because of BCR’s strategic role in the group, high reputational risks for the parent and its international franchise in case of BCR’s default, and high level of integration between the parent and the subsidiary.
Fitch officials also think that SG would have very strong propensity to provide support to BRD, given the inclusion of BRD in SG’s single-point-of-entry resolution group and considerable reputational risk for SG from a default at BRD. They added that any required support for BRD would be immaterial relative to the parent’s ability to provide it, given BRD’s small relative side in the group’s total assets.
“BCR’s and BRD’s Short-Term IDRs of ‘F2’ are the lower of the two options corresponding to their Long-Term IDR of ‘BBB+’, as the latter is driven by shareholder support and constrained by the Country Ceiling. We do not consider transfer and convertibility risks to be materially lower in the short term relative to the long term. BCR’s and BRD’s IDRs and SSRs could be downgraded if the Romanian Country Ceiling was lowered. BCR’s and BRD’s IDRs and SSRs could be also downgraded if their respective parents’ IDRs were downgraded by more than one notch,” Fitch also said in its report.