Fitch keeps IKB on watch

Fitch Ratings said it maintained IKB Deutsche Industriebank AG's long-term BBB- issuer default rating, short-term F3 issuer default rating BBB- senior debt and B+ subordinated lower tier II debt on Rating Watch negative.

The ratings reflect the high level of sovereign support arising from the funding guarantees provided by the German government's Financial Market Stabilization fund, the agency said.

The Ratings Watch continues to reflect Fitch's expectation that the authorities' propensity of support will recede in line with the scheduled expiration of these guarantees by 2015, the agency added. The reduction of the fund's coverage may encourage other critical funding providers to cut their exposure to IKB.

Fitch said it also considers that the enactment of the German bank resolution regime in January, in conjunction with IKB's weak stand-alone profile and uncertain recovery prospects, exposes the bank and its subordinated lower tier II debt holders to an increased resolution risk.

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