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 covering retail customers of large banking groups.
Ulster Bank's owner, Royal Bank of Scotland (RBS), said in 2016 that it planned to ring-fence 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 RBS Plc, the non-ringfenced part of the group on review for a downgrade as a result of the new legal structure of the organisation.
