Moody's Japan K.K. has confirmed the A1 long-term issuer rating of Mitsubishi UFJ Trust International Limited (MUTI) and deemed the ratings outlook as “stable”.
The ratings confirmation concludes the review for downgrade that was initiated on 2 December 2014 on MUTI's long-term ratings.
The review was prompted by the downgrade of the long-term deposit and debt ratings of its parent, Mitsubishi UFJ Trust and Banking Corporation (MUTB, A1 stable), to A1 from Aa3.
This action in turn followed the downgrade of the Japanese government bond rating to A1 from Aa3.
According to a statement from Moody’s: “The decision to equalise the ratings of MUTI with that of its parent MUTB at A1 is due to MUTI's status as an institution which is highly integrated and harmonised with MUTB. As such, an analysis of MUTI as a standalone company is not considered appropriate.”
MUTI is the international securities lending arm of MUTB and is highly integrated and harmonised with MUTB in terms of its business model, human resources and risk/liquidity management.
Moody’s has classed MUTI as an “important” vehicle for securities lending outside Japan, as it is performing the role of securities lending—on an agent basis—for the whole custodial business of MUTB's subsidiary Master Trust Bank of Japan (MTBJ, not rated); a role that is indispensible to MUTB's global custody business.
According to Moody's, the probability of MUTI being sold to a third party, even under a stress situation for MUTB, is very low in light of its importance to MUTB's network.
Accordingly, if MUTI should face financial difficulties, it is very likely that extraordinary support would be extended from MUTB to MUTI without regulatory intervention.
