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FITCH GAUGES EFFECT OF PROPOSAL ON BANK SENIOR DEBT, DEPOSITS -- FITCH FINANCIAL WIRE --

 NEW YORK, Aug. 6 /PRNewswire/ -- Domestic deposits and other senior debt of financial institutions with investment grade parent companies generally will carry the same credit ratings even if legislation pending before Congress is passed, Fitch says. The legislation, if enacted, will give a preference in liquidation to domestic deposit obligations of financial institutions over other senior obligations such as foreign deposits, bank notes, purchased Federal funds, letters of credit among others. This depositor preference law would effectively subordinate the claims of other senior creditors to domestic depositors of FDIC-insured institutions. Under current Federal law, senior creditors rank pari passu with uninsured depositors.
 Assuming the legislation becomes effective, Fitch generally will not make a short- or long-term rating distinction between domestic deposits and other senior obligations of institutions with parent companies whose senior unsecured debt is rated investment grade. This policy does not ignore the increased risk absorbed by foreign depositors and other nondeposit creditors, but recognizes the low probability of a liquidation of these institutions. The above notwithstanding, in some cases where Fitch deems it appropriate, a rating distinction between senior obligations could apply to institutions rated investment grade. If an institution's parent company's senior unsecured debt is rated below investment grade, Fitch generally will make a rating distinction between its long-term domestic deposits and its other senior obligations.
 Fitch is reviewing all senior bank and thrift ratings and will take rating actions, where appropriate, once the pending legislation is signed into law.
 In a related matter, Fitch reviewed its policy concerning the ratings for commonly controlled depository institutions. Fitch will continue to assign similar ratings to the obligations of depository institutions under common control even though risk characteristics of the respective institutions may be dissimilar. The cross guarantee provisions of FIRREA combined with the capital maintenance guarantees contained in the FDICIA legislation provide the necessary rationale to consider the risks of all institutions under common ownership on a combined basis.
 -0- 8/6/93
 /CONTACT: Scott J. O'Donnell, 212-908-0531, or Fred W. DeBussey, 212-908-0521, both of Fitch/


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PS -- NY014 -- 0220 08/06/93 09:41 EDT
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Publication:PR Newswire
Date:Aug 6, 1993
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