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Moody's assigns counterparty risk ratings to 5 New Zealand banks, branches

Moody's assigned Aa3 long-term and Prime-1 short-term counterparty risk ratings to five New Zealand banks and four of their London offices.

The rating agency said June 15 that it assigned the ratings to ANZ Bank New Zealand Ltd. and its London branch, ASB Bank Ltd., ASB Finance Ltd. (London Branch), Bank of New Zealand, BNZ International Funding Ltd. London Branch, Westpac New Zealand Ltd., Westpac Securities NZ Ltd (London Branch) and Kiwibank Ltd.

The ratings are in line with the lenders' respective counterparty risk assessments. The ratings of the lenders, except Kiwibank, incorporate a notch of uplift for government support and reflects their high systemic importance in New Zealand, as well as the expectation that their respective Australian parents would be the primary source of support.

An upgrade is unlikely for the four lenders given their structural reliance on confidence-sensitive funding and tail risks in the New Zealand housing market. Conversely, a downgrade on their respective parents ? Australia & New Zealand Banking Group Ltd., National Australia Bank Ltd., Westpac Banking Corp. and Commonwealth Bank of Australia ? could also lead to a similar action on the units' ratings.

Meanwhile, the ratings on Kiwibank reflects its position as a state-owned bank given a high probability of support from the government. Given the country's sovereign rating, Moody's notes that there is little upward potential for the bank's ratings.

A downgrade in the rating of the New Zealand government, changes to the country's policy or ownership of the bank as well as weakening asset quality or capital could lead to a negative ratings action.