KEY RATING DRIVERS
The subordinated notes are rated one notch below the bank's National Long-Term Rating to reflect their higher loss-severity risk compared with senior unsecured instruments. Key terms of the notes include a non-viability trigger for loss-absorption (defined as emergency capital assistance from an empowered government agency), with a partial rather than a mandatory full writedown. The notes do not have going-concern loss-absorption features, and hence there is no additional notching for non-performance risk.
BAY's National Long-Term Rating, which is used as the anchor rating, reflects Fitch's belief that the bank is a strategically important subsidiary of the Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU; A/Stable/a). BTMU holds 76.9% of BAY and the Thai bank plays a key role in the parent's strategy for south-east Asia, with high levels of integration and marketing linkages.
RATING SENSITIVITIES
Any change in the National Ratings of BAY would have a similar effect on the ratings of the notes. No upside is possible to the National Ratings as they are already at the top end of the scale. However, a downgrade of the Long-Term Issuer Default Rating of BTMU could lead to negative rating action on BAY, including on the National Long-Term Rating.
BAY's ratings could also be negatively affected if BTMU shows a reduced propensity to support BAY - which may, for example, be seen via a significantly reduced shareholding or reduction in its strategic role. However, Fitch believes that this is unlikely to occur in the medium term.