Moody’s downgraded 10 German public sector banks yesterday (Wednesday), six of them by three notches, because it considers them less likely to receive external support if required.

Concluding a review initiated on 1 July, Moody’s took the following rating actions: affirmed Landesbank Berlin at A1; downgraded DekaBank Deutsche Girozentrale by one notch, from Aa2 to Aa3; cut by two notches Landesbank Hessen-Thüringen, from Aa2 to A1, Landesbank Saar, from A1 to A3, and HSH Nordbank, from A3 to Baa2; and lowered by three notches the ratings of Bayerische Landesbank, from A1 to Baa1, Deutsche Hypothekenbank, from A1 to Baa1, Landesbank Baden-Württemberg, from Aa2 to A2, Norddeutsche Landesbank, from Aa3 to A3, and Bremer Landesbank Kreditanstalt Oldenburg, from Aa2 to A2. A review of WestLB (A3), direction uncertain, was extended.

The rating agency said that future government or systemic support has become less certain, partly due to a new bank resolution regime enabling the government to impose losses on creditors in liquidation. It said that strict conditions set by the European Commission also restricted the provision of support.

“Even after today’s downgrades, the senior ratings of Landesbanken continue to incorporate support assumptions that are very high because Landesbanken are ultimately government-owned, either directly or indirectly,” added Moody’s. “Following the reassessment of support assumptions support uplift of two to five notches is now incorporated in the banks’ long term ratings (from a total of four to eight previously).”