Ratings agency Fitch has assigned a number of ratings to Bank of Ireland's new holding company demonstrating a positive outlook on the bank.
The newly established holding company and parent of Bank of Ireland saw its ratings equalised with those of the bank itself. Fitch assigned a long-term issuer default rating (IDR) of BBB-, a viability rating of BBB- and a short term IDR of F3.
The BBB- rating is given to companies that are considered to be “secure” in Fitch’s opinion. However, this category of company is also likely to be impacted by adverse changes in the economy.
Fitch analysts Joanna Drobnik and Marc Ellsmore wrote that the ratings are "based on the bank's strong domestic franchise, strengthened capitalisation, normalised funding profile, sound liquidity, diversified revenue streams, and improving, albeit still weak, asset quality".
The positive outlook on the holding company reflects the potential for upgrading the bank’s viability rating and IDR as long as the bank continues to improve its asset quality and strengthen its capitalisation, “while continuing to generate satisfactory profits and maintain its sound funding and liquidity”.
The holding company is required under a European Union regulation on the Single Resolution Mechanism which set up the Single Resolution Board (SRB). The purpose of the SRB is to put plans in place to avoid the potentially negative impact of a bank failure on the economy and on financial stability. With that in mind, the requirement for Bank of Ireland is to provide a framework for the bail-in of bondholders in the event of another financial crisis.
