Savings Banks Westphalia-Lippe

Primary Credit Analyst: Bernd Ackermann, Frankfurt (49) 69-33-999-153; [email protected]

Secondary Contact: Harm Semder, Frankfurt (49) 69-33-999-158; [email protected]

Table Of Contents

Major Rating Factors

Outlook

Rationale

Related Criteria And Research

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1466567 | 300027913 Savings Banks Westphalia-Lippe

Additional SACP a+ Support 0 0 + + Factors

Anchor a- Issuer Credit Rating Business GRE Support 0 Adequate Position 0

Capital and Very Strong Earnings +2 Group Support 0 Risk Position Adequate 0 A+/Stable/A-1

Funding Average 0 Sovereign Support 0 Liquidity Strong

Major Rating Factors

Strengths: Weaknesses:

• Cohesiveness and a mutual protection scheme that • Revenues exposed to margin erosion from low ties the regional savings banks together. interest rates. • Regional market leader in retail and small and • A relatively large and inflexible cost base. midsize corporate banking. • Fragmented structure of the German savings banks • Very strong capitalization and adequate earnings sector, which limits the ability to respond quickly to retention. strategic challenges, if needed. • Generally moderate credit and market risk.

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1466567 | 300027913 Savings Banks Westphalia-Lippe

Outlook : Stable

Standard & Poor's Ratings Services' outlook on the 69 institutions comprising the Savings Banks Westphalia-Lippe (SWL) is stable. This reflects our view of a low likelihood of a material change in Germany's economic and banking industry risks or the savings banks' business model and risk profile over the next 18-24 months. It also reflects our view that the level of cohesion and cooperation within this group of savings banks is unlikely to change.

We could take a more positive view of the group credit profile if SWL's earnings were to demonstrate lower sensitivity to a sustained period of low interest rates than we currently assume. This could be through diversifying the revenue base to include more high-value-added or fee-based products or through successful cost management. In our view, this would lead to continuously stable profitability. However, we also consider that SWL is not insulated from developments in the wider savings banks' network across Germany, including other regional banks' exposure to their wholesale-banking-oriented central banks or "Landesbanks." Therefore, an upgrade is remote at present.

We could lower the ratings if we were to conclude that SWL's contingent liability to Erste Abwicklungsanstalt (EAA) could materially weigh on the banks' risk-adjusted capital (RAC) ratio, contrary to our base-case assumption. We understand that there will be regular reviews by independent auditors assessing the savings banks' need to build further reserves, which might provide additional information over the next 18-24 months. We could also take negative rating actions if profitability were to erode faster than we currently assume or if payouts to the savings banks' public-sector backers were to increase substantially. These developments could lead us to revise our view of SWL's capital and earnings, in particular if our projected RAC ratio were to fall below 15%. We could also lower the ratings if there were adverse changes in the risk profile of Germany's national savings banks.

Rationale

Our ratings on SWL are based on the banks' aggregate strength. We consider SWL to be a cohesive group of legally independent institutions and therefore equalize our ratings on each savings bank with our view of SWL's group credit profile at 'a+'. This is because we consider each entity to be integral to SWL's current identity. In particular, we believe that the member banks are likely to support other group members under any foreseeable circumstances.

Our ratings reflect our anchor of 'a-' for banks operating in Germany, as well as our view of SWL's "adequate" business position, "very strong" capital and earnings, "adequate" risk position, "average" funding, and "strong" liquidity, as our criteria define these terms.

Anchor: 'a-' for banks operating in Germany only Under our bank criteria, we use our Banking Industry Country Risk Assessment's economic risk and industry risk scores to determine a bank's anchor, the starting point in assigning an issuer credit rating. Our anchor for a commercial bank operating only in Germany is 'a-', based on an economic risk score of '1' and an industry risk score of '3'.

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1466567 | 300027913 Savings Banks Westphalia-Lippe

This applies to SWL because its member banks' loan exposure to private-sector nonbanks is almost exclusively in Germany. We expect that nondomestic lending will remain marginal. The Savings Banks Act North Rhine-Westphalia ("Sparkassengesetz Nordrhein-Westfalen") governs the savings banks' business scope. It stipulates that loans to residents outside each savings bank's home territory should remain exceptions.

Our economic risk assessment on Germany reflects its highly diversified and competitive economy and lack of major economic imbalances. An export-led nation, Germany nevertheless remains vulnerable to swings in global economies, trade flows, and capital market trends.

Industry risk benefits from Germany's extensive funding market and banks' domestic funding surpluses from low domestic credit growth and high savings rates. However, the banking sector's competitive dynamics result in relatively low profitability, which is fueled by significant disparities in banks' commercial targets and the business and risk profiles of market players.

We believe that the prospect of extraordinary government support for U.K., German, and Austrian banks is now "uncertain," following the full implementation of the EU Bank Recovery and Resolution Directive (BRRD) in these countries. This assessment takes into account our view that:

• These governments have become significantly less willing to use taxpayer funds to bail out banks; • Complex systemic banks in these countries are generally not yet "resolvable," meaning that a disorderly resolution or insolvency could carry systemic consequences; • Even if these governments wished to provide capital support to a failed systemic bank, the bank resolution frameworks now implemented in these countries in response to the BRRD heavily constrain these governments' capacity to provide such support without substantial burden-sharing by creditors; and • Some senior creditors face substantial risk of being mandatorily bailed in as part of that process, unless they are protected by a substantial buffer of junior instruments. While we do not rule out the possibility that systemic banks in these countries might receive extraordinary government support, we see the predictability of such support as having materially reduced to the point that we regard it as being "uncertain."

Table 1 Savings Banks Westphalia-Lippe Key Figures --Year ended Dec. 31--

2014 2013 2012 2011 2010 Adjusted assets 122,709 120,524 119,322 117,608 115,576 Customer loans (gross) 85,233 84,113 81,997 79,767 77,436 Adjusted common equity 13,897 13,303 12,729 12,152 11,653 Operating revenues 3,488 3,397 3,347 3,309 3,505 Noninterest expenses 2,327 2,257 2,208 2,191 2,136 Core earnings 744 720 717 644 729

Business position: Highly predictable business volumes, with earnings sensitive to the sustained low-interest-rate environment We consider SWL's business position to be "adequate," balancing the banks' highly predictable business volumes, offset by above-average sensitivity of revenues to a sustained low-interest-rate environment, against our view that their

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1466567 | 300027913 Savings Banks Westphalia-Lippe strategic effectiveness is weaker than that of retail banking peers in Germany.

We consider that the SWL member banks continue to benefit from highly predictable business volumes throughout economic cycles, compared with many domestic peers. We base our assessment primarily on the savings banks' high market shares in their home territory in core retail banking and small to midsize corporate banking products with a demonstrably loyal customer base. The banks have low exposure to cyclical businesses or market-sensitive income. This results in revenues with a high annuity character, mainly from net interest income. Market shares are typically between 45% and 60% across core products, based on a dense network of about 1,400 branches and service centers, and very positive recognition of the nationwide savings banks brand. The savings banks' public-law status and regional roots, coupled with very strong capitalization, also reinforce clients' confidence and loyalty. Accordingly, the banks have benefited from a "flight to quality" since the onset of the financial market crisis in 2007.

These benefits are partly offset by revenue concentration in interest income from commoditized banking products, coupled with a relatively large and inflexible cost base. This leads to an above-average sensitivity of the savings banks' profitability to the sustained low-interest-rate environment, with a flat yield curve in the eurozone. We consider that low interest rates will increasingly eat into interest margins over the next few years. It reduces income opportunities from maturity mismatches and the investment of equity capital.

The savings banks' home region of Westphalia-Lippe is relatively large and diversified. We estimate that the regional economy represents approximately 10% of Germany's GDP.Unemployment in several urban areas of the Ruhr region is well above the German average. However, the savings banks have achieved sound earnings for many years, despite these challenges.

In our view, the group's ability to react swiftly to strategic challenges is more limited than for other banking groups. The savings banks are separate legal entities with independent management, which tends to slow down the decision-making process, in our opinion. Moreover, we consider that the central banks and special product providers of Germany's nationwide savings banks sector are more fragmented and more subject to government interference than those of their main peer, Germany's cooperative banking sector. This makes coordination more difficult and limits the savings banks' effectiveness to exploit their full market potential. Good cooperation within SWL and with SWL's designated central bank, Landesbank Hessen-Thueringen Girozentrale (Helaba), partly mitigate this weakness.

Table 2 Savings Banks Westphalia-Lippe Business Position --Year ended Dec. 31--

(%) 2014 2013 2012 2011 2010 Total revenues from business line (mil. €) 3,488 3,397 3,347 3,309 3,506 Commercial & retail banking/total revenues from business line 100 100 100 100 100 Return on equity 5.4 5.5 5.7 5.4 6.2

Capital and earnings: Projected RAC ratio well above 15%, with high quality of capital We assess SWL's capital and earnings as "very strong." This is primarily based on our projection that the savings banks will be able to maintain an aggregate RAC ratio well above the 15% threshold that is commensurate with a "very

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1466567 | 300027913 Savings Banks Westphalia-Lippe strong" assessment. It also reflects our view that the savings banks will be able to comply with current and future regulatory capital requirements coming into effect under Basel III. The banks' capital levels have increased substantially over the past 10 years, based on earnings retention that has outpaced low growth rates in risk assets. Despite our projection that profitability will come under pressure from the low-interest-rate environment, we anticipate that aggregate capital levels will continue to improve over the next two years, although at a slower pace than in recent years.

SWL's aggregate regulatory total capital ratio under Basel III's phase-in rules stood at a high 17.3% at year-end 2014, up from 13.2% in 2006 under Basel II. We consider that the savings banks' total capital ratios are more reflective of their ability to comply with regulatory requirements than core equity ratios. Taxed hidden reserves under German accounting standards are only eligible as Tier 2 regulatory capital. However, they are economically akin to retained earnings and therefore could easily be booked into core equity Tier 1 capital if needed. In the case of SWL, there are additional amounts of taxed hidden reserves that are not accounted for in total regulatory capital. The savings banks have issued very limited amounts of other Tier 2-eligible instruments.

Our RAC ratio for SWL (before adjustments) was 16.6% at year-end 2014, and we project that it will improve further to between 17.0% and 17.5% by year-end 2017. Our RAC ratio benefits from very low economic risk in Germany, which leads to lower risk weights for domestic exposure than under the banks' regulatory standardized approach. Moreover, we fully consider taxed hidden reserves in our total adjusted capital (TAC) measure, to the extent that they are not allocated to specific risks. These effects are offset by higher charges for equity holdings in other financial institutions, which are ultimately mainly financial services providers of the German savings banks sector. Quality of capital is high, given that SWL's core capital does not include any hybrid capital instruments.

Key assumptions in our projection are an unchanged low-interest-rate environment that gradually reduces net interest margins by several basis points each year; continued upward drift of cost bases above inflation, in light of regulatory costs and wage pressure in Germany; a modest increase in fee income in light of investments in securities advisory activities; and credit loss provisions gradually reverting to levels more in line with historic averages after very favorable conditions recently. Importantly, we also assume that profit pay-outs to SWL's public-sector backers will remain marginal at about €80 million per year, in line with historic numbers. Our projection also assumes that loan growth will remain modest and broadly in line with GDP growth.

Equally, however, capital management within SWL is complicated because capital is not fully fungible. This reflects the legally independent nature of the savings banks, meaning that each bank needs to fulfill regulatory requirements individually. Furthermore, savings banks rely exclusively on earnings retention to generate capital. We do not assume that their public-sector backers would provide material capital injections if needed. Therefore, we believe that the most likely option in case of capital constraints at an individual savings bank will be a merger with a financially stronger member institution. Alternatively, the regional protection scheme might provide financial support, or we might see a combination of both approaches.

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Table 3 Savings Banks Westphalia-Lippe Capital And Earnings --Year ended Dec. 31--

(%) 2014 2013 2012 2011 2010 S&P RAC ratio before diversification 16.6 N.M. N.M. N.M. N.M. S&P RAC ratio after diversification 17.1 N.M. N.M. N.M. N.M. Adjusted common equity/total adjusted capital 100 100 100 100 100 Net interest income/operating revenues 67.4 69.9 69.6 70.8 68.0 Fee income/operating revenues 21.3 21.1 20.6 21.6 19.8 Market-sensitive income/operating revenues 7.1 5.0 5.5 2.6 8.8 Noninterest expenses/operating revenues 66.7 66.4 66.0 66.2 61.0 Preprovision operating income/average assets 1.0 1.0 1.0 1.0 1.2 Core earnings/average managed assets 0.6 0.6 0.6 0.6 0.6

N.M.--Not meaningful.

Table 4 Savings Banks Westphalia-Lippe RACF [Risk-Adjusted Capital Framework] Data

Basel II Average Basel Standard & Average Standard (Mil. €) Exposure* RWA II RW (%) Poor's RWA & Poor's RW (%)

Credit risk Government and central banks 15,172 208 1 512 3 Institutions 19,642 901 5 4,291 22 Corporate 27,041 26,254 97 16,342 60 Retail 52,263 24,328 47 18,076 35 Of which mortgage 32,410 10,927 34 6,161 19 Securitization§ 87 87 100 87 100 Other assets 2,648 3,482 132 2,384 90 Total credit risk 116,853 55,260 47 41,692 36

Market risk Equity in the banking book† 11,396 7,958 85 35,659 313 Trading book market risk -- 0 -- 0 -- Total market risk -- 7,958 -- 35,659 --

Insurance risk Total insurance risk ------0 --

Operational risk Total operational risk -- 6,521 -- 6,429 --

Basel II Standard & % of Standard & (Mil. €) RWA Poor's RWA Poor's RWA

Diversification adjustments RWA before diversification 70,076 83,780 100 Total Diversification/Concentration -- (2,698) (3) Adjustments RWA after diversification 70,076 81,083 97

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Table 4 Savings Banks Westphalia-Lippe RACF [Risk-Adjusted Capital Framework] Data (cont.)

Tier 1 Total adjusted Standard & Poor's (Mil. €) capital Tier 1 ratio (%) capital RAC ratio (%)

Capital ratio Capital ratio before adjustments N.A. N.A. 13,897 16.6 Capital ratio after adjustments‡ N.A. N.A. 13,897 17.1

*Exposure at default. §Securitisation Exposure includes the securitisation tranches deducted from capital in the regulatory framework. †Exposure and Standard & Poor's risk-weighted assets for equity in the banking book include minority equity holdings in financial institutions. ‡Adjustments to Tier 1 ratio are additional regulatory requirements (e.g. transitional floor or Pillar 2 add-ons). RWA--Risk-weighted assets. RW--Risk weight. RAC--Risk-adjusted capital. N.A.--Not available. Sources: Company data as of Dec. 31, 2014, Standard & Poor's.

Risk position: Low complexity of exposures, but some asset-liability mismatch risk and a contingent obligation for EAA In our view, SWL's overall risk position is "adequate." This reflects our assessment that the banks' loan books are granular and seasoned; that risks from EAA (Erste Abwicklungsanstalt), the workout unit of their former central bank WestLB AG are limited; and that the banks' profitability should ultimately benefit from rising interest rates, despite relatively high maturity mismatches in nontrading books. It also reflects the limited size and relatively benign risk profile of the banks' equity stake in their central bank, Helaba.

Risk profiles across SWL member institutions may differ, however, given that each bank defines its own risk strategy and guidelines. Yet the banks rely on methodologies and tools developed centrally by the savings banks sector in Germany through their national association Deutscher Sparkassen- und Giroverband (DSGV). Risk exposures are scrutinized by the auditing department of their regional savings banks association, Sparkassenverband Westfalen-Lippe (SVWL). Contributions to the savings banks' protection scheme are also based on the risk profile, which creates a certain incentive to contain risk appetites.

SWL's main risk exposure is to credit risk from its regional domestic retail customers, mainly mortgage loans, and to small and midsize enterprises (SMEs) in the region. Securities investments are mainly in domestic and highly rated European government bonds or covered bonds, and therefore do not add materially to the risk profile. We expect SWL's exposure profile to remain stable and continue benefiting from a favorable loss record. Customer loan growth has been low, at 1% to 3% over the past five years, and broadly in line with the domestic market. There are no sector concentrations given the size and diversity of the Westphalia-Lippe region. There are also no material single-obligor concentrations, given that each bank on a stand-alone basis has to comply with large loan limits under banking regulation. There is low complexity in risk management, given the banks' focus on traditional banking products and each savings bank's detailed knowledge of its local customer base. Trading risk is immaterial because only three entities in SWL maintain trading books with marginal exposures.

SWL's key market risk exposure is to mismatches in the repricing of the member banks' assets and liabilities. For instance, the exposure of their economic value to a sudden upward 200-basis-point parallel interest rate shock is material, although not exceptionally high, in our view. Risk management also relies on behavioral assumptions, given the high proportion of deposits with interest rates that can be varied at the discretion of the banks or where depositors may adjust or withdraw their balances at short notice or without any notice. However, economic value exposures

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1466567 | 300027913 Savings Banks Westphalia-Lippe reflect to some degree the banks' strategy to stabilize earnings by investing their sizable capital base on a rolling basis in long-term assets. Moreover, including the assumption of new business, earnings should actually benefit if interest rates are rising, given the current margin compression between loans and deposits.

Despite SWL's contingent liability regarding EAA, we believe it is unlikely that the RAC ratio would fall below the 15% threshold. EAA is a nonbank workout unit for assets originated by the former WestLB, which SWL partly owned. SWL's share of contingent liabilities relating to EAA amounts to €2.25 billion (equivalent to 16% of TAC) in the event that EAA's losses exceed its equity. However, the likelihood that EAA would need to draw on these support sources is diminishing with the material progress made in the run-off and decreasing concentration risk. In our view, the savings banks have already built up an appropriate buffer of taxed hidden reserves for this risk, which we do not include in TAC.

Table 5 Savings Banks Westphalia-Lippe Risk Position --Year ended Dec. 31--

(%) 2014 2013 2012 2011 2010 Growth in customer loans 1.3 2.6 2.8 3.0 1.7 Total diversification adjustment / S&P RWA before diversification (3.2) N.M. N.M. N.M. N.M. Total managed assets/adjusted common equity (x) 8.8 9.1 9.4 9.7 9.9 New loan loss provisions/average customer loans 0.0 0.1 0.1 0.2 0.2

N.M.--Not meaningful.

Funding and liquidity: Funding is mainly via insured deposits, and liquidity ratios are strong We consider SWL's funding to be "average" and its liquidity position "strong." We base this assessment on the high amount of retail and SME customer deposits, and sizable surplus liquidity of the SWL savings banks.

The savings banks' funding stems chiefly from insured savings accounts and term deposits from their regional customer franchises, which we consider a positive factor. The sizable equity capital also provides a source of stable funding. Equally, we consider that in light of low interest rates, customers have materially shifted deposits into short-dated and on-demand deposits, while demand for longer-term loans has increased. At year-end 2014, about 88% of all customer deposits were savings accounts with notice periods of three months or daily term deposits.

Moreover, the savings banks' direct access to wholesale funding channels, if needed, is limited. Instead, the banks typically rely on interbank funds provided by central banks associated to the German savings banks sector ("Landesbanks"), which we do not consider to be part of the SWL group. SWL's quantitative metrics, such as their stable funding ratio of 108%, their customer loan-to-deposits ratio of 95%, and the absolute size of customer deposits are sound, but overall they are not clearly above the German average. In particular, they are weaker quantitatively and qualitatively than our assessment of the consolidated German cooperative banking sector, which we see as the SWL's closest peer.

Our positive view of liquidity reflects the savings banks' prudent liquidity management. Broad liquid assets covered short-term wholesale funding by about 3.6x at year-end 2014. This ratio is stronger than that of the overwhelming majority of domestic and international peers, and indicates SWL's strong ability to survive under stressful conditions

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1466567 | 300027913 Savings Banks Westphalia-Lippe for 12 months or more. We believe that the banks have high flexibility from holding deposits and large portfolios of unencumbered high-quality securities eligible for refinancing with the European Central Bank. Their stock amounts to about 15% of total assets, according to financial statements. However, we estimate that the actual amount is higher because the banks hold sizable amounts through managed investment fund vehicles, which also include highly rated eligible bonds. Contingent liabilities are small, at about 6% of total assets, and relate mainly to undrawn loan commitments.

Table 6 Savings Banks Westphalia-Lippe Funding And Liquidity --Year ended Dec. 31--

(%) 2014 2013 2012 2011 2010 Core deposits/funding base 82.8 82.9 80.9 79.4 78.5 Customer loans (net)/customer deposits 95.5 95.5 95.8 96.1 95.6 Long term funding ratio 96.5 97.5 96.9 96.7 95.9 Stable funding ratio 107.8 109.1 109.6 109.9 109.1 Short-term wholesale funding/funding base 4.0 2.8 3.5 3.7 4.5 Broad liquid assets/short-term wholesale funding (x) 3.6 5.1 4.5 4.4 3.6 Net broad liquid assets/short-term customer deposits 13.1 15.0 15.9 17.1 16.3 Short-term wholesale funding/total wholesale funding 23.1 16.5 18.1 17.8 21.1 Narrow liquid assets/3-month wholesale funding (x) 5.8 8.2 7.5 6.3 4.7

External support: Member banks are likely to support other members under any foreseeable circumstance Our ratings are based on SWL's aggregate strength, given that we consider member banks to be a group of integrated, albeit legally independent institutions. We assess the unsupported group credit profile (GCP) at 'a+', considering our view of the banks' business position, capital and earnings, risk position, funding, and liquidity. Our ratings on each member bank are at the level of the GCP, given that we consider them to be core to SWL under our "Group Rating Methodology," published Nov. 19, 2013, on RatingsDirect. This means that we believe the rest of the member banks are likely to support other group members under any foreseeable circumstances.

Our assessment considers that the SWL member banks are tied together through various mechanisms. The savings banks use the same "Sparkassen" brand and logo, meaning that failure by one institution results in material reputation risk for other member banks. Moreover, the Savings Banks Act of North Rhine-Westphalia requires that the banks are members in the SVWL, including being subject to regular audits by the SVWL, which should allow the SVWL to identify risks early on. It also defines the member banks' common legal status as public law institutions, as well as their business models. This also restricts competition between member banks, meaning that they are legally able to cooperate.

The savings banks are also required to be members of the regional mutual protection scheme. The primary goal of this protection scheme is to avoid default of member institutions, and this support has been demonstrated on a few instances in the past when needed. There is also no particular concentration risk related to any member institution. Measured by total assets, the largest member savings bank represents only about 7% of SWL's aggregate assets. That said, our assessment relies on the assumption that member banks would provide support beyond the amount currently

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1466567 | 300027913 Savings Banks Westphalia-Lippe available from the protection scheme.

SWL is a subgroup of the German savings banks sector. Savings banks across Germany share many characteristics with the SWL, including a joint brand and the legal status. They are tied together mainly on a regional level by similar legislation and structures as the SWL. The German savings banks are also organized at national level, and this includes overflow mechanisms between the regional protection schemes. This means that a savings bank in one region may receive support from the other regions if its home region's resources have been exhausted.

However, our ratings on SWL are based on our assessment of SWL's unsupported GCP.This reflects SWL's relative credit strength and our opinion that cooperation is strongest and timely support most likely at the regional level. Nevertheless, we believe that savings banks across Germany would support each other under almost all foreseeable circumstances, given their common characteristics and support mechanisms. For the same reason, we would not consider SWL to be insulated from developments in the wider German savings banks sector. We believe that SWL's prospects in terms of financial performance and funding interact significantly with developments in the national German savings banks sector, despite regulatory, legal, and contractual limitations to the amount of support members can provide.

Our assessment of SWL's GCP does not include support from additional loss-absorbing capacity. We believe that regulators would apply a resolution framework to individual institutions in the SWL and not to the group as a whole. It is unlikely that individual savings banks would be subject to a well-defined bail-in resolution process, given their small size, limited complexity, and low systemic importance in Germany as stand-alone entities.

Additional rating factors: None No additional factors affect this rating.

Related Criteria And Research

Related Criteria • Bank Rating Methodology And Assumptions: Additional Loss-Absorbing Capacity, April 27, 2015 • Bank Hybrid Capital And Nondeferrable Subordinated Debt Methodology And Assumptions, Jan. 29, 2015 • Group Rating Methodology, Nov. 19, 2013 • Quantitative Metrics For Rating Banks Globally: Methodology And Assumptions, July 17, 2013 • Revised Market Risk Charges For Banks In Our Risk-Adjusted Capital Framework, June 22, 2012 • Banks: Rating Methodology And Assumptions, Nov. 9, 2011 • Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011 • Bank Capital Methodology And Assumptions, Dec. 6, 2010 • Methodology For Mapping Short- And Long-Term Issuer Credit Ratings For Banks, May 4, 2010 • Use Of CreditWatch And Outlooks, Sept. 14, 2009 • Commercial Paper I: Banks, March 23, 2004

Related Research • Banking Industry Country Risk Assessment: Germany, July 23, 2015

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1466567 | 300027913 Savings Banks Westphalia-Lippe

Anchor Matrix

Economic Risk Industry Risk 1 2 3 4 5 6 7 8 9 10 1 a a a- bbb+ bbb+ bbb - - - - 2 a a- a- bbb+ bbb bbb bbb- - - -

3 a- a- bbb+ bbb+ bbb bbb- bbb- bb+ - - 4 bbb+ bbb+ bbb+ bbb bbb bbb- bb+ bb bb - 5 bbb+ bbb bbb bbb bbb- bbb- bb+ bb bb- b+ 6 bbb bbb bbb- bbb- bbb- bb+ bb bb bb- b+ 7 - bbb- bbb- bb+ bb+ bb bb bb- b+ b+ 8 - - bb+ bb bb bb bb- bb- b+ b 9 - - - bb bb- bb- b+ b+ b+ b 10 - - - - b+ b+ b+ b b b-

Ratings Detail (As Of October 19, 2015) Sparkasse Arnsberg-Sundern Counterparty Credit Rating A+/Stable/A-1 Counterparty Credit Ratings History 19-Oct-2015 A+/Stable/A-1 Sovereign Rating Germany (Federal Republic of) AAA/Stable/A-1+ Related Entities Herner Sparkasse Issuer Credit Rating A+/Stable/A-1 Kreis- und Stadtsparkasse Unna-Kamen Issuer Credit Rating A+/Stable/A-1 Kreissparkasse Halle (Westf.) Issuer Credit Rating A+/Stable/A-1 Kreissparkasse Steinfurt Issuer Credit Rating A+/Stable/A-1 Kreissparkasse Wiedenbrueck Issuer Credit Rating A+/Stable/A-1 Sparkasse Attendorn-Lennestadt-Kirchhundem Issuer Credit Rating A+/Stable/A-1 Sparkasse Beckum-Wadersloh Issuer Credit Rating A+/Stable/A-1 Sparkasse Bergkamen-Boenen Issuer Credit Rating A+/Stable/A-1 Sparkasse Bielefeld Issuer Credit Rating A+/Stable/A-1 Sparkasse Bochum Issuer Credit Rating A+/Stable/A-1

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Ratings Detail (As Of October 19, 2015) (cont.) Sparkasse Burbach-Neunkirchen Issuer Credit Rating A+/Stable/A-1 Sparkasse der Stadt Iserlohn Issuer Credit Rating A+/Stable/A-1 Sparkasse Ennepetal-Breckerfeld Issuer Credit Rating A+/Stable/A-1 Sparkasse Erwitte-Anroechte Issuer Credit Rating A+/Stable/A-1 Sparkasse Finnentrop Issuer Credit Rating A+/Stable/A-1 Sparkasse Froendenberg Issuer Credit Rating A+/Stable/A-1 Sparkasse Gelsenkirchen Issuer Credit Rating A+/Stable/A-1 Sparkasse Geseke Issuer Credit Rating A+/Stable/A-1 Sparkasse Guetersloh Issuer Credit Rating A+/Stable/A-1 Sparkasse Hagen Issuer Credit Rating A+/Stable/A-1 Sparkasse Hamm Issuer Credit Rating A+/Stable/A-1 Sparkasse Hattingen Issuer Credit Rating A+/Stable/A-1 Sparkasse Hochsauerland Issuer Credit Rating A+/Stable/A-1 Sparkasse Hoexter Issuer Credit Rating A+/Stable/A-1 Sparkasse im Kreis Herford Issuer Credit Rating A+/Stable/A-1 Sparkasse Kierspe-Meinerzhagen Issuer Credit Rating A+/Stable/A-1 Sparkasse Lemgo Issuer Credit Rating A+/Stable/A-1 Sparkasse Lippstadt Issuer Credit Rating A+/Stable/A-1 Sparkasse Luedenscheid Issuer Credit Rating A+/Stable/A-1 Sparkasse Luenen Issuer Credit Rating A+/Stable/A-1 Sparkasse Maerkisches Sauerland Hemer-Menden Issuer Credit Rating A+/Stable/A-1 Sparkasse Meschede Issuer Credit Rating A+/Stable/A-1

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1466567 | 300027913 Savings Banks Westphalia-Lippe

Ratings Detail (As Of October 19, 2015) (cont.) Sparkasse Minden-Luebbecke Issuer Credit Rating A+/Stable/A-1 Sparkasse Muensterland Ost Issuer Credit Rating A+/Stable/A-1 Sparkasse Olpe-Drolshagen-Wenden Issuer Credit Rating A+/Stable/A-1 Sparkasse Paderborn-Detmold Issuer Credit Rating A+/Stable/A-1 Sparkasse Rietberg Issuer Credit Rating A+/Stable/A-1 Sparkasse Siegen Issuer Credit Rating A+/Stable/A-1 Sparkasse Soest Issuer Credit Rating A+/Stable/A-1 Sparkasse Vest Recklinghausen Issuer Credit Rating A+/Stable/A-1 Sparkasse Werl Issuer Credit Rating A+/Stable/A-1 Sparkasse Westmuensterland Issuer Credit Rating A+/Stable/A-1 Sparkasse Witten Issuer Credit Rating A+/Stable/A-1 Sparkasse Wittgenstein Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Bad Oeynhausen Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Blomberg/Lippe Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Bocholt Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Bottrop Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Delbrueck Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Dortmund Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Gevelsberg Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Gladbeck Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Haltern am See Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Herdecke Issuer Credit Rating A+/Stable/A-1

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1466567 | 300027913 Savings Banks Westphalia-Lippe

Ratings Detail (As Of October 19, 2015) (cont.) Stadtsparkasse Hilchenbach Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Lengerich (Westfalen) Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Porta Westfalica Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Rahden Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Rheine Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Schmallenberg Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Schwerte Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Sprockhoevel Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Versmold Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Werne Issuer Credit Rating A+/Stable/A-1 Stadtsparkasse Wetter(Ruhr) Issuer Credit Rating A+/Stable/A-1 Staedtische Sparkasse zu Schwelm Issuer Credit Rating A+/Stable/A-1 VerbundSparkasse Emsdetten Ochtrup Issuer Credit Rating A+/Stable/A-1 Vereinigte Sparkasse im Maerkischen Kreis Issuer Credit Rating A+/Stable/A-1 *Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard & Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country. Issue and debt ratings could include debt guaranteed by another entity, and rated debt that an entity guarantees.

Additional Contact: Financial Institutions Ratings Europe; [email protected]

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1466567 | 300027913 Copyright © 2015 Standard & Poor's Financial Services LLC, a part of McGraw Hill Financial. All rights reserved.

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