Moody's Investor Service downgraded its rating on OTP Bank's Upper Tier 2 perpetual subordinated bond issue to Ba1 with a negative outlook from Baa2 pursuant to the financial service's revised Guidelines for Rating Bank Hybrids and Subordinated Debt published in November 2009, OTP announced.
Dow Jones reported on Friday that prior to the global financial crisis, Moody's had incorporated into its ratings an assumption that support provided by national governments and central banks to shore up a troubled bank would, to some extent, benefit the subordinated debt holders as well as the senior creditors. The systemic support for these instruments has not been forthcoming in many cases. The revised methodology largely removes previous assumptions of systemic support, resulting in the January 29 rating action. In addition, the revised methodology generally widens the notching on a hybrid's rating that is based on the instrument's features.
Moody's did not change any other ratings on OTP Bank. (MTI – Econews)