Scope Ratings today has assigned an Issuer Credit Strength Rating (ICSR) of A with Stable outlook and a short-term rating of S-1 with Stable outlook to UBS Group AG, which is the newly created holding company of UBS AG. Scope already rates UBS AG at A with Stable outlook and S-1 with Stable outlook. In rating the holding company at the same level as the operating bank, Scope pointed to the highly integrated structure of the UBS group, financially, operationally and strategically.

In its bank rating methodology published earlier this year Scope noted that it may potentially rate a banking group’s holding company at the same level as it would rate the main operating bank. This would be the case as long as there are no grounds to estimate that, in a stress scenario, the creditors of the holding company would be treated differently from the creditors of the operating bank. With respect to UBS group, Scope added that future debt issuance by the holding company rather than by the operating bank would aim to create greater transparency and clarity in resolution, as requested by FINMA (the Swiss financial regulatory authority). Scope added that the rating of future debt to be issued by UBS Group AG will be a function of the terms and conditions of the securities, specifically with respect to contractual bail-in clauses, if any.

In a report published in July 2014, Scope notes that in the very improbable event of a resolution of a large Swiss bank, FINMA has made its preference clear for the concept of Single Point of Entry (SPE). Under this structure “creditors of the parent bank or top-level holding company bear a share of the losses, allowing the entire financial group to be recapitalized. This recapitalization must be sufficient to meet the needs of all group companies in Switzerland and abroad” highlighted FINMA in in its August 2013 position paper on the resolution of systematically important banks.

The following ratings were assigned:
- Issuer Credit-Strength Rating (ICSR) at A, with Stable outlook. The ICSR represents a credit opinion on a bank’s ability to meet its contractual financial commitments on a timely basis and in full while remaining a going concern.
- Short-term debt rating of S-1, with Stable outlook.

The ratings assigned to UBS Group AG are (i) based on public information, (ii) not solicited by the issuer and (iii) with issuer participation in the process.

The methodology used for the rating assignment is “Bank Rating Methodology” published in February 2014. The methodology used for the financial-forecast part of the rating analysis is “Forecasting Bank Financials” published in February 2014. These methodologies are available on www.scoperatings.com.