S&P Global Ratings has assigned a ‘BBB+’ long-term issue rating to Oversea-Chinese Banking Corp.’s (OCBC) Tier-2 subordinated notes, which are due in 2035. This $1 billion issuance is part of OCBC’s $30 billion global medium-term note programme. The rating is two notches below S&P’s ‘a’ assessment of OCBC’s stand-alone credit profile, reflecting the securities’ subordination risk and a nonviability clause.
The nonviability clause mandates that OCBC must permanently write off the securities, either partially or fully, if a loss-absorption trigger event occurs. This could happen if the Monetary Authority of Singapore (MAS) informs the bank of its nonviability without such a write-off, or if MAS opts for a public-sector capital injection to prevent the bank from becoming nonviable.
OCBC plans to utilise these notes as Tier-2 regulatory capital. The securities will rank junior to all depositors and senior creditors, but senior to all additional Tier-1 bondholders. This structure is designed to bolster OCBC’s capital base whilst providing a buffer for senior obligations.
The assignment of this rating is significant as it underscores the bank’s strategic approach to maintaining robust capital adequacy. It also highlights the importance of regulatory compliance in ensuring financial stability. As OCBC continues to expand its financial offerings, the rating provides market participants with a measure of the bank’s creditworthiness and risk profile.
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