Fitch Ratings on March 27 downgraded the expected long-term issuer default rating of Barclays Bank UK plc, the entity to become Barclays Plc's U.K. ring-fenced unit, to A(EXP) from A+(EXP) and placed the rating on Rating Watch Positive.
Fitch also downgraded Barclays Bank UK's derivative counterparty rating to A(dcr)(EXP) from A+(dcr)(EXP) and placed it on Rating Watch Positive. The ring-fenced bank's F1(EXP) short-term issuer default rating, "a(EXP)" viability rating and 1(EXP) support rating were affirmed.
The downgrade of the unit's long-term rating reflects the agency's revised expectation of the timing of the subordination of the intragroup debt extended to the bank from Barclays. Fitch now believes that the senior holding company debt down-streamed to Barclays Bank UK will not be subordinated at the time of its setup on April 1, but that it will become subordinated over the next few months and at latest by Jan. 1, 2019, when the U.K.'s ring-fencing rules are implemented.
The issuer default ratings of Barclays' ring-fenced bank are based on its viability rating and equalized with it. The Rating Watch Positive reflects Fitch's view that the unit's issuer default rating will be upgraded one notch above the viability rating when the group will have injected a substantial amount of junior debt to confer protection to its external senior obligations if the bank fails.