S&P: BNP Paribas (China) Ltd. 'A-/A-2' Ratings Affirmed On Continued High Strategic Importance To The Parent; Outlook Stable

S&P Global Ratings affirmed its 'A-' long-term and 'A-2' short-term issuer credit ratings on BNP Paribas (China) Ltd. (BNPP China). Our outlook on the long-term rating is stable.

The affirmed rating on BNPP China continues to reflect the bank's high strategic importance to parent BNP Paribas group. We expect BNPP China to continue to operate in business lines that are integral to the overall group strategy. We rate BNPP China one notch below the 'a' unsupported group credit profile (unsupported GCP) of the BNP Paribas group. Our unsupported GCP designates our opinion of a group's creditworthiness excluding the likelihood of extraordinary support (for example, additional loss-absorbing capacity support).

The efforts of the European resolution authorities to improve the resolvability of banks remain a work in progress. However, we consider it highly likely that, if large systemically important banks such as BNP Paribas failed, they would be subject to a bail-in led resolution strategy that sought to maintain their critical functions and servicing of senior unsecured obligations. While we factor no related uplift into our ratings on BNP Paribas, we may do so in time if the bank makes substantial progress in building a bail-in buffer.

However, as with other European banks, the position of BNP Paribas' individual subsidiaries in this group resolution strategy are less clear. In time, we expect improved visibility, aided in part by the prepositioning of loss-absorbing capacity in the main subsidiaries. Nevertheless, amid this uncertainty, we have adjusted our base case for BNPP China's prospects in a group resolution scenario.

We now consider it unlikely that the resolution authorities will seek to ensure that BNPP China receives timely and sufficient support from its parent, in case needed. The bank operates in China, which remains a non-effective resolution jurisdiction, in our view. Also, we note BNPP China's small size in a group context and that its activities are less critical to the effective resolution of BNP Paribas. For example, BNPP China accounts for less than 2% of BNP Paribas' total equity. (This low figure is consistent with our classification of the bank as a highly strategically important subsidiary of the group rather than a core subsidiary.)

The stable outlook reflects our view that BNPP China will maintain its high strategic importance to the group at least for the coming one to two years, and therefore benefit from the group's likely unchanging creditworthiness, excluding potential extraordinary support.

We would lower the ratings on BNPP China if we lowered our assessment of the unsupported GCP of BNP Paribas. We may also downgrade BNPP China if we believe the bank's strategic importance to the group has diminished.

We may upgrade BNPP China if we believe the group's unsupported GCP has strengthened. We may also upgrade a subsidiary in some circumstances where its strategic importance within a group intensifies. However, we consider as remote the possibility that BNPP China would become a core subsidiary to the group within the next two years.
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