Moody's puts HSBC Holdings and HSBC Europe on downgrade review

Rating's agency Moody's said Tuesday it placed on review for downgrade the Aa3 long-term deposit and senior unsecured debt ratings of HSBC Continental Europe, which includes Belgium, Spain, Greece, Ireland, Italy, Luxembourg, the Netherlands, Poland, Czech Republic and Sweden.

It also placed on review for downgrade HSBC Continental Europe's long-term counterparty risk ratings of Aa2 and long-term counterparty risk assessments of Aa2(cr) and its adjusted baseline credit assessment of a2, while affirming the standalone baseline credit assessment of baa3 and affirming all short-term ratings.

This follows a similar rating action on March 8, when Moody's placed HSBC Continental Europe's ultimate parent HSBC Holdings plc's A2 senior unsecured long-term debt ratings on review for downgrade.

On December 1, 2020, HSBC France and all its European branches, including Belgium, Spain, Greece, Ireland, Italy, Luxembourg, the Netherlands, Poland, Czech Republic and Sweden  took the legal name HSBC Continental Europe.

Moody's said HBCE is the group's principal entity for euro denominated capital markets businesses in Europe, recipient of the group's wholesale activities with European clients following Brexit.

Although Moody's expects the willingness of HSBC Holdings to support HSBC Continental Europe will remain very high, a downgrade of HSBC Holdings notional baseline credit assessment of a2 would indicate a lower capacity to support its strategic subsidiary in case of need, Moody's said.

The review for downgrade on HSBC Continental Europe's Adjusted BCA of a2 also reflects continued potential negative implications for HSBC Continental Europe of a material repositioning of HSBC group operations in Europe.

HSBC Continental Europe's long-term deposit and senior unsecured debt ratings of Aa3 and Adjusted baseline credit assessment of a2 were placed on review for downgrade, Moody's said.

The review for downgrade of the a2 adjusted BCA mainly reflects the review for downgrade on HSBC Holdings a2 notional BCA prompted by risks related to the execution of the group's strategic plan presented on February 23, 2021 in a still challenging and uncertain operating environment.

HSBC Continental Europe's Adjusted BCA incorporates four notches of affiliate support uplift from its baa3 standalone BCA, reflecting Moody's assessment of the strategic importance of HSBC Continental Europe to the group.