OREANDA-NEWS. Fitch Ratings has today affirmed Standard Chartered Bank (Taiwan) Limited's (SCBTL) Long-Term Issuer Default Rating (IDR) at 'AA-' and Viability Rating (VR) at 'bbb'. The Outlook remains Negative. A full list of rating actions is at the end of this rating action commentary.

The rating action follows the affirmation of ratings on Standard Chartered Bank (SCB), the sole owner of SCBTL, on 30 June 2015 (see "Fitch affirms Standard Chartered at 'AA-', Maintains Negative Outlook", at www.fitchratings.com).

KEY RATING DRIVERS
IDRS, NATIONAL RATINGS AND SENIOR DEBT
SCBTL's IDR and Outlook remain aligned with those of its parent, SCB, as Fitch views SCBTL as a core subsidiary within the group's international network, specifically its role in the group's greater China strategy. This is underpinned by their aligned risk management, a shared brand name and global network.

SCBTL's senior unsecured bonds are rated at the same level as its National Long-Term Rating, reflecting the relative vulnerability of default on its senior obligations within a national scale for Taiwan.

VIABILITY RATING
The affirmation of SCBTL's VR reflects its stable balance-sheet strength, mainly because Fitch expects capitalisation to continue to be enhanced through a selective growth strategy, despite modest profitability. At the same time, Fitch believes the bank's asset-quality risk is manageable, backed by adequate collateralisation of its mortgage portfolio (57% of total loans at end-1H15) and reasonable quality of its moderate exposure to China. The VR also factors in ordinary support extended by SCB, including liquidity support and consulting service for operations.

SUPPORT RATING
The Support Rating (SR) of '1' on SCBTL is based on Fitch's continuing belief of an extremely high probability of support from SCB, if needed.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
SCTBL's Basel II-compliant subordinated bonds are rated one notch below SCBTL's National Long-Term Rating, to reflect their subordinated status and the absence of going concern loss-absorption features.

The bank's Basel III-compliant Tier 2 (B3T2) debt are also rated one notch below its National Long-Term Rating due to rating compression at the top end of the National Rating scale. Fitch typically assigns Taiwanese B3T2 debt international ratings that are two notches below an issuer's anchor rating, or in SCBTL's case, its parent SCB's 'aa-' VR.

These aforementioned notching practices for subordinate bonds are in accordance with Fitch's criteria on rating bank regulatory capital of financial institutions.

RATING SENSITIVITIES
IDRS, NATIONAL RATINGS AND SENIOR DEBT
Any rating action on SCB could trigger a similar rating action on SCBTL's IDR. The latter's National Long-Term Rating, however, has a Stable Outlook, as its 'AAA(twn)' rating will still be commensurate with 'A+' IDR should SCBTL be downgraded.

The ratings on SCBTL's senior debt will remain unchanged should SCBTL be downgraded as its 'AAA(twn)' National Long-Term Rating will still be commensurate with an 'A+' IDR.

VIABILITY RATING
SCBTL's VR may be upgraded if the bank demonstrates improvement in its local franchise, business execution, asset quality and profitability while maintaining sound risk appetite. The VR may be downgraded if a sharp correction in the property market were to cause severe mortgage losses or if the risk profile materially weakens from aggressive growth in better-yielding exposures, such as SME or China-related lending.

SUPPORT RATING
The SR is sensitive to any change in the ability and propensity of SCB to provide timely support to SCBTL and is unlikely to be downgraded even if SCB is downgraded.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
SCBTL's Basel II-compliant subordinated debt ratings will remain unchanged as its 'AAA(twn)' National Long-Term Rating will still be commensurate with 'A+' IDR should SCBTL be downgraded. Basel III-compliant subordinated debt ratings, however, will be downgraded by one notch should SCBTL be downgraded.

A Credit Update on SCBTL will be available shortly on www.fitchratings.com.

The rating actions are as follows:

- Long-Term IDR affirmed at 'AA-'; Negative Outlook
- Short-Term IDR affirmed at 'F1+'
- National Long-Term Rating affirmed at 'AAA(twn)'; Stable Outlook
- National Short-Term Rating affirmed at 'F1+(twn)'
- Viability Rating affirmed at 'bbb'
- Support Rating affirmed at '1'
- Senior unsecured debt National Long-Term Rating affirmed at 'AAA(twn)'
- Basel II-compliant subordinated debt National Long-Term Rating affirmed at 'AA+(twn)'
- Basel III-compliant subordinated debt National Long-Term Rating affirmed at 'AA+(twn)'