Fitch Affirms MUFG's Larger Senior Unsecured Note Issue at 'A'
OREANDA-NEWS. Tokyo-20 April 2016: Fitch Ratings has affirmed the 'A' rating on Japan-based Mitsubishi UFJ Financial Group, Inc.'s (MUFG, A/Stable) senior unsecured note issue, which was increased to USD7bn from USD5bn. Fitch on 1 March 2016 assigned a final rating to the notes, which were issued out of the banking group's debt programme.
The notes are expected to count towards MUFG's total loss-absorption capacity (TLAC) requirements, which have been set by the Financial Stability Board at 16% of its risk-weighted assets, effective 1 January 2019.
The senior bonds will constitute direct, unconditional, unsecured and unsubordinated general obligations of MUFG and rank pari passu without any preference among themselves and with all of the group's other unsecured indebtedness, other than subordinated indebtedness and except for statutorily preferred indebtedness. The notes will be structurally subordinated to the liabilities of MUFG's subsidiaries, including Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU; A/Stable) and Mitsubishi UFJ Trust & Banking Corporation (MUTB; A/Stable).
The proceeds will be down-streamed in full to the operating subsidiaries as obligations that rank pari passu with other senior unsecured obligations of the operating subsidiaries.
KEY RATING DRIVERS
The rating of the notes is aligned with the Long-Term Issuer Default Rating (IDR) of MUFG. MUFG's IDR is based upon its Viability Rating (VR), which reflects the banking group's strong and very sound domestic franchises, solid liquidity profiles in yen, sound asset quality and adequate capital positions, which Fitch expects will continue improving through consistent retained earnings. The rating also considers MUFG's improved capital position, which counters a rising appetite for risk outside Japan, although modest earnings and market risks still expose the group to volatility.
The rating of the senior unsecured notes issued by MUFG would be directly affected by a change in MUFG's IDRs, which would stem from a change in its VR. However, the rating would also then be underpinned by its 'A-' Support Rating Floor.
Negative action could also stem from an unexpected change in the regulatory framework that clearly and materially increases the loss severity of the notes relative to other senior unsecured debt.
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