Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

Primary Credit Analysts: Osman Sattar, FCA, London 020 71767198; [email protected] Richard Barnes, London (44) 20-7176-7227; [email protected]

Secondary Contacts: Alexandre Birry, London (44) 20-7176-7108; [email protected] Giles Edwards, London (44) 20-7176-7014; [email protected] Dhruv Roy, London (44) 20-7176-6709; [email protected] Sadat Preteni, London (44) 20-7176-7560; [email protected]

• In our view, the "leave" result in the U.K.'s June 2016 referendum on EU membership ("Brexit") has increased the risks of adverse economic developments in the U.K. As a result, we now see a negative trend for U.K. banking industry economic risk. • We also believe that the U.K. economy has now entered into a correction phase, driven by our revised expectation that imbalances will worsen as credit growth slows and real house prices contract. However, we consider that banks' underwriting standards, low interest rates, and low unemployment should mitigate the extent of losses in the banking sector. • We are therefore revising to negative from stable our outlook on the majority of U.K. domestic banks, as described below, while affirming their ratings.

LONDON (S&P Global Ratings) July 7, 2016--S&P Global Ratings said today that it has taken various rating actions on U.K. banks to reflect rising economic risks for the U.K. domestic banking industry (for full list, see Ratings List below). • We revised to negative from stable the outlooks on PLC and Barclays Bank PLC (including its core subsidiaries), CYBG PLC and its subsidiary PLC, HSBC Holdings PLC and certain of its rated subsidiaries, PLC and its rated bank

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

subsidiaries, Santander UK PLC, and Nationwide Building Society. We affirmed the long- and short-term counterparty credit ratings on these institutions. The outlook revisions reflect our view that we could lower the ratings on these institutions if we see a materialization of the economic risks described below. • We affirmed the long- and short-term counterparty credit ratings on Santander UK Group Holdings PLC (the nonoperating [NOHC] of Santander UK PLC), and maintained the stable outlook. This reflects our view that parental support from would likely offset a decline in Santander UK PLC's intrinsic creditworthiness. • We revised to stable from positive our outlook on U.K.-based NOHC The Royal Group PLC (RBSG). We also revised to stable from positive our outlook on the main operating entity of the RBS group, The PLC (RBS). We affirmed the long- and short-term counterparty credit ratings on both RBSG and RBS. The stable outlooks reflect our view that RBSG's strong capital position will likely offset any materialization of the economic risks we see for the U.K. banking industry. • We affirmed the long- and short-term counterparty credit ratings on PLC and its rated bank subsidiaries. The outlook on the group's rated banking subsidiaries remains positive, and that on the holding company remains stable. This reflects our view of Standard Chartered's limited exposure to the U.K. economy. • We affirmed the short-term counterparty credit rating on Bradford & Bingley PLC.

ECONOMIC RISKS FOR THE U.K. BANKING INDUSTRY As a result of the growing risk of adverse economic developments and economic uncertainty arising from the recent Brexit vote, we have revised our view of the trend for economic risk in the U.K. banking sector to negative from positive. The negative trend signifies that we see at least a one-in-three likelihood that the economic risk assessment may worsen over the next two years. We believe that the U.K. economy is now entering a correction phase. We have revised our view based on the outcome of the Brexit vote, which we expect will reduce consumer confidence and the demand for credit in the near term. In turn, we believe that this, and the potential reduced demand for U.K. property from overseas buyers, will affect house prices. Nevertheless, we do not expect significant losses in the housing sector given the much-improved underwriting standards since the financial crisis, the still low--and declining--interest rates, and low unemployment.

In our opinion, the outcome of the Brexit vote is a seminal event, and will lead to a less predictable, stable, and effective economic policy framework in the U.K. The Brexit result could lead to a deterioration of the U.K.'s economic performance, including its large sector, which is a major contributor to employment and public receipts. As such, we recognize that there is a high degree of uncertainty in the near term. In particular, it is not clear if the U.K. will retain access to the EU single market--the destination of 44% of its exports--on existing terms. Future arrangements regarding the export of services, including by the U.K.'s important financial

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote services industry, are equally uncertain, in our view.

We believe that U.K. banks' strengthened capital, liquidity, and funding profiles provide considerable flexibility to manage an extended period of economic and market uncertainty. We are therefore affirming the ratings on the banks. Nevertheless, heightened political and economic risks will likely create more challenging operating conditions for banks, which are by nature confidence—sensitive institutions. In particular, we believe this will constrain earnings in several ways: • Credit growth will likely be more subdued. We believe there is now an increasing risk of a house price correction arising from the uncertainty generated by Brexit. In our view, households' high share of property assets increases the sensitivity of consumer demand to housing prices. • Capital markets revenues will likely fall as corporate activity, such as mergers or acquisitions, declines. • Pressure on net interest margins could increase if, as appears likely, the Bank of England loosens its monetary policy further, and U.K. banks' credit spreads remain higher than before Brexit. Asset repricing could absorb some of this effect, however. • Credit losses will likely increase, albeit from a very low base, given that possible declines in collateral values and a higher level of customer defaults would lead to additional provisioning needs.

Under our current base-case scenario, we expect industry credit losses will rise from the low of 14 basis points (bps) that we saw in 2015, to above 30 bps in 2016 and 45 bps in 2017. Although increasing--and higher than our forecast in April 2016--this level of losses remains far lower than the long-run average of 69 bps, and lower than the 100+ bps experienced during the global financial crisis (see "Low Credit Losses For Even Longer: The Silver Lining For U.K. Banks," published April 5, 2016). This is because we believe that underwriting has been more disciplined, and pockets of higher risk lending, such as commercial real estate, are smaller than before the financial crisis. Ongoing low interest rates are also supporting borrowers' debt repayment capacity.

We will also monitor how funding conditions evolve for U.K. banks, both in terms of the availability and cost of wholesale funding. We note that U.K. banks accelerated funding activity and bolstered liquidity buffers before the referendum to mitigate potential market volatility. The Bank of England has also made sterling and foreign currency liquidity available through collateralized repo (repurchase agreement) operations. We have detected no unusual funding flows since the referendum and indeed one U.K. bank has already recommenced public debt issuance following the Brexit vote. Still, we are alert to the potential impact of economic and political uncertainty on market access and pricing. Several U.K. banks have sizable gross TLAC/MREL issuance requirements for the coming years and we would revisit our ALAC forecasts if they were to fall behind schedule in building these buffers (ALAC--additional loss-absorbing capacity; TLAC--total loss-absorbing capacity; MREL--minimum requirement for own funds and eligible liabilities).

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

Our view of economic risk in the U.K. could weaken--potentially leading to a downward revision in our economic risk score to '5' from '4'--if: • A significant correction in asset prices becomes increasingly likely, with credit losses jumping to levels well above the 69 bp long-term average, and closer to levels seen during the global financial crisis; or • Factors such as another referendum in Scotland leading to Scottish independence, or sterling's loss of status as a reserve currency, result in significant further institutional, financial, and economic uncertainty.

On the other hand, if we assess that uncertainty has reduced and any economic deterioration is likely to be contained (with manageable credit losses), we could revise the economic risk trend to stable.

We have also reviewed the stand-alone credit profile (SACP) factors for each U.K. bank to assess whether there are elements that may mitigate the effects on overall bank creditworthiness of the less supportive economic environment that we reflect in our Banking Industry Country Risk Assessment (BICRA) for the U.K. Some U.K. banks are clearly much more dependent on the U.K. economy, sterling revenues, interest income, and current passporting arrangements than others. Nevertheless, in our view, the risks that prompted our revision of the economic risk trend to negative are relevant for all U.K. banks with material domestic operations, which has resulted in widespread outlook revisions.

The following paragraphs provide more detail behind our rating actions on each bank.

BARCLAYS PLC The negative outlook on Barclays reflects the risk of a weaker operating environment following the U.K.'s decision to leave the EU. Specifically, we could revise down the anchor for U.K. banks to 'bbb' from 'bbb+' over the next two years if prolonged uncertainty following the referendum weakens the macroeconomic outlook and economic resilience of the U.K. economy. With all others factors remaining the same, this would result in a one-notch downgrade of Barclays PLC (the NOHC) and Barclays Bank PLC (and its core subsidiaries).

Although we recognize that the reasonable geographic diversification of the group's revenue streams could help cushion the effects of any macroeconomic deterioration in the U.K., the negative outlook reflects our view that the pending elements of the group's restructuring (such as the disposal of non-core assets) could become more challenging than hitherto. It will also likely delay the group's return to a more stable and predictable earnings profile. The negative outlook incorporates our pre-existing view that the future build-up of additional ALAC buffers could in part mitigate any credit negative implications for Barclays Bank PLC as the non-ring-fenced legal entity within the wider Barclays group (see "Barclays Bank 'A-/A-2' Ratings Affirmed On Strategic Announcements And Ring-Fencing Plans; Outlook Stable," published March 7, 2016). It also reflects our expectation that group capitalization, as measured by our risk-adjusted capital (RAC) ratio, will remain comfortably in the adequate range despite the drag of exceptional items related to litigation and restructuring.

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

We could revise the outlook back to stable if we perceive that the macroeconomic effects of the "leave" vote are contained and prospects for the group's strategy and earnings (including the continued rundown of non-core assets) have become more predictable.

BRADFORD & BINGLEY PLC The affirmation of the 'A-1' short-term rating on U.K.-incorporated Bradford & Bingley PLC (B&B) reflects S&P Global Ratings' continued view that the U.K. government's 100% ownership supports its creditworthiness. Importantly, this includes funding and liquidity support, which, in our view, essentially removes funding risks and ensures that unsecured third-party obligations will be repaid when due. Moreover, we expect that a timely response from the U.K. government will mitigate any unforeseen volatility relating to B&B's work-out efforts. As such, our assessment of implicit state support compensates any intrinsic business model weaknesses arising from B&B being a run-off-entity.

CLYDESDALE BANK PLC AND CYBG PLC The negative outlook on Clydesdale Bank reflects the risk of a weaker operating environment following the U.K.'s decision to leave the EU. Specifically, we could revise down the anchor for U.K. banks to 'bbb' from 'bbb+' over the next two years if prolonged uncertainty following the referendum weakens the macroeconomic outlook and economic resilience of the U.K. economy. This could, for example, manifest itself through a sharp correction in asset prices and rising systemwide credit losses. With all others factors remaining the same, this would result in a one-notch downgrade of Clydesdale.

We could also lower the rating on Clydesdale if we observed that the bank's operating performance and risk appetite deviated materially from current management expectations; there were potential conduct issues not covered by the mitigation package with former parent National Australia Bank (NAB), which weighed on profitability; or risks relating to the operational separation from NAB were not being managed adequately.

An upgrade is not likely at this stage.

The negative outlook on CYBG mirrors that on Clydesdale.

HSBC HOLDINGS PLC We revised the outlook on group NOHC HSBC Holdings PLC, and certain European and North American subsidiaries, to negative from stable. These subsidiaries include HSBC Bank PLC, HSBC France, HSBC USA Inc., HSBC Bank USA N.A., and HSBC Bank Canada (see Ratings List for full details). The stable outlook on The Hongkong and Shanghai Banking Corp. Ltd. (HBAP) and the outlooks on its subsidiaries across Asia-Pacific remain unchanged. This is because potential extraordinary support from the Hong Kong government would maintain the long-term rating on HBAP at 'AA-' if we were to downgrade HSBC Holdings by one notch.

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

The negative outlook reflects potential pressures over our two-year rating horizon arising from the U.K.'s vote to leave the EU and China's economic slowdown. Although HSBC's highly diversified business profile and strengthening capitalization are significant mitigants, we nevertheless identify risks to asset quality and revenues that may challenge the current ratings. In particular, we expect uncertainty over whether the U.K.'s future relationship with the EU will hinder the U.K. economy. China's economic slowdown appears to have had little impact to date on HSBC's risk profile, but we remain alert to signs of credit deterioration in its material exposure across the Asia-Pacific region. Increased market uncertainty could also prevent HSBC from achieving its strategic priorities. The negative outlook also takes account of other factors--the prolonged period of low global interest rates, HSBC's ongoing U.S. deferred prosecution agreement, and its outstanding litigation cases.

We could lower the ratings if we consider that economic conditions and prospects in HSBC's major markets are no longer supportive of the current ratings. This could lead us to revise down our risk position assessment to adequate from strong or, less probably, revise down the anchor to 'bbb' from 'bbb+'. We could also reassess our current business position assessment if HSBC falls behind schedule on the implementation of its strategic plan, potentially leading to a deeper restructuring of its business model.

We could revise the outlook to stable if HSBC demonstrates resilient asset quality metrics and capital generation. An improvement in the RAC ratio comfortably and sustainably above our 10% threshold would also support a stable outlook. We would additionally look for confirmation that HSBC is making good progress toward its strategic targets and that it will continue to build ALAC-eligible instruments in line with its issuance guidance for 2016-2018.

LLOYDS BANKING GROUP PLC The negative outlook reflects the negative trend we see for economic risk in the U.K. and our view that Lloyds' creditworthiness could weaken if its operating environment weakens. Nevertheless, our ratings reflect our view that Lloyds' statutory profitability will further improve through end-2018, that it will maintain an S&P Global Ratings RAC ratio of about 8.0%-8.5%, asset growth will be moderate with no significant step-up in risk appetite, and it will continue to gradually build its buffer of ALAC to about 6%.

We could lower the ratings on Lloyds or its subsidiaries if we revised down the unsupported group credit profile (GCP), currently 'a-'. This would most likely follow a weakening in our economic risk assessment for the U.K. While less likely, we could also revise down the unsupported GCP if, for example, Lloyds exhibited a substantial increase in risk appetite that could affect its future asset quality or exposure to conduct risk. Finally, we could lower the ratings on the group's operating companies if Lloyds' ALAC buffer fell below our 4.5% threshold and looked likely to remain there.

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

We would most likely revise the outlook to stable if we considered that risks to the U.K. economy were reducing. While less likely, this could also occur if Lloyds very substantially builds its core capitalization beyond our current expectations. Similarly, if we see a strong possibility that Lloyds will build its ALAC buffer beyond 8%, we could revise to stable the outlook on core operating subsidiaries PLC and Bank of Scotland PLC, though we consider this an unlikely scenario at present.

NATIONWIDE BUILDING SOCIETY The negative outlook on Nationwide Building Society reflects the risk of a weaker operating environment following the U.K.'s decision to leave the EU. Specifically, we could revise down the anchor for U.K. banks to 'bbb' from 'bbb+' over the next two years if prolonged uncertainty following the referendum weakens the macroeconomic outlook and economic resilience of the U.K. economy. This could, for example, manifest itself through a sharp correction in asset prices and rising systemwide credit losses. With all others factors remaining the same, this would result in a one-notch downgrade of Nationwide.

Our ratings on Nationwide reflect its relatively low risk appetite, strong asset quality, and predictable internal capital generation. That said, the negative outlook reflects our view that the combination of prolonged low interest rates and rising credit losses (albeit from low levels) could lower the trajectory of organic capital build through retained earnings, given Nationwide's concentrated exposure to the leveraged U.K. household sector. We also note that a lower assessment of economic risk in the U.K. would make it less likely that Nationwide's RAC ratio would exceed 10% over our two-year outlook horizon.

We could revise the outlook back to stable if we perceive that the macroeconomic effects of the "leave" vote are contained and that margin pressures and credit losses will not encumber our favorable view of the predictability of Nationwide's earnings profile relative to U.K. banking industry peers.

THE ROYAL BANK OF SCOTLAND GROUP PLC The stable outlook on The Royal Bank of Scotland Group PLC (RBSG) and its main subsidiaries balances a potential increase in the economic risks that U.K. banks face--on the back of the outcome of the EU referendum--against the group's improved capitalization and progress with its restructuring.

We could lower the ratings on NOHC RBSG in the next 18-24 months if a material increase in economic risks were to lead us to revise down the starting point for our ratings on U.K. banks (the anchor), and if an improved assessment of capital and earnings did not offset this. This could occur, for instance, if one-off charges--including those related to conduct and litigation--prevented the prospective RAC ratio from sustainably exceeding 10%, and if increased economic risks or additional restructuring requirements were to further delay the group's return to statutory profitability. We also note that any future reorganization of the group to comply with U.K. ring-fencing regulations could

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote change the creditworthiness of the group or individual group entities.

We could raise the ratings if the outcome of the referendum doesn't lead to a material increase in systemwide risks, and if we believe that RBS' RAC ratio will remain sustainably above our 10% threshold for a higher capital and earnings assessment--even allowing for probable large conduct and litigation charges during 2016 and the possible return to shareholder distributions at the outer edges of our two-year outlook horizon. For the operating subsidiaries of the group, this is also based on the assumption that RBS' ALAC buffer will not fall materially below our projections, even though the "excess" total adjusted capital (TAC) element of the ALAC would fall away under a higher capital assessment.

The outlook on the main operating subsidiaries of RBSG mirrors that on RBSG. It also incorporates our expectation that the bank will maintain an ALAC buffer in excess of 8.5%. At this time, we don't expect to remove the one-notch negative adjustment that we incorporate in the issuer credit rating. This adjustment reflects our expectation that RBS will remain a relative underperformer in terms of statutory profits in 2016 compared with similarly rated peers and our view of its operating performance as less predictable than that of peers.

SANTANDER UK GROUP HOLDINGS PLC The stable outlook on Santander UK Group Holdings (the "U.K. NOHC") reflects our view that the potential for support from the higher rated parent, Banco Santander, to the Santander UK (SanUK) group would maintain the ratings on the U.K. NOHC at their current level even if we were to revise down our assessment of Santander UK's intrinsic creditworthiness. This takes into consideration Banco Santander's unsupported GCP of 'a-', and the fact that we don't include any ALAC support in the 'BBB' rating on the U.K. NOHC.

We could raise our ratings on Santander UK Group Holdings if our view of the parent's creditworthiness remains at least stable and if we have greater confidence that the parent would, under any circumstances and without restrictions, channel its support through the U.K. NOHC, if needed.

We could lower the rating on Santander UK Group Holdings if we were to revise down the unsupported GCP on SanUK and lower our ratings on Banco Santander.

SANTANDER UK PLC The negative outlook on Santander UK PLC ("SanUK") reflects the growing risk of adverse economic developments arising in the next two years following the "leave" vote, which may undermine the U.K.'s economic resilience.

We could lower the ratings on SanUK by one notch if we revised down the anchor for U.K. banks based on a weaker assessment of the economic risks that U.K.-focused banks, such as SanUK, face.

Although a more remote risk at this stage, we could also lower the ratings if

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

SanUK group's issuance of ALAC-eligible instruments--including NOHC senior debt--were to fall materially short of our expectations, possibly on the back of a material increase in risk aversion from markets toward U.K. banks. We currently project that most of the ALAC progression to above 8% over the next 18 months will stem from senior debt issuance by holding companies.

We could revise the outlook back to stable if we take a more favorable view of systemwide risks for domestic U.K. banks.

STANDARD CHARTERED PLC

The stable outlook continues to factor in the difficult operating environment and work-in-progress nature of management's restructuring efforts to reduce risk concentration. It also reflects our overall view that there are currently limited negative or positive pressures on the rating (see "Ratings On Standard Chartered Entities Lowered By One Notch; Positive Outlook Reflects ALAC, Restructuring Initiatives," published March 31, 2016). We also see Standard Chartered group's exposure to the U.K. economy as fairly limited, and consider that the Brexit vote is unlikely to have a material effect on the group's overall credit profile.

Though unlikely in the near term, we could lower the rating if we see a further weakening in the group's overall credit profile. This could result from events such as: (1) a sharp adverse development in asset quality; (2) a significant weakening in the group's funding or liquidity profiles; or (3) factors that will require management to undertake a significantly more far-reaching and substantial restructuring to restore the group's profitability.

While a remote possibility at this time, we could raise the long-term rating if the RAC ratio improves substantially beyond our current 11% projection, leading us to conclude that the group's capitalization provides a substantial buffer against possible future losses.

The positive outlook on the group's operating subsidiaries mainly reflects our view that the group's accumulation of ALAC is likely to offer increased protection to senior unsecured creditors of the group's operating subsidiaries in the next 12-24 months.

We would likely raise our long-term ratings on operating subsidiaries once the group accumulates 8.5% ALAC on a sustainable basis. An upgrade would also need to be supported by a view that a higher rating, especially for key operating entity Standard Chartered Bank, is justified in comparison with similarly highly-rated peers. It would also depend on our ongoing belief that regulators and resolution authorities would seek to ensure that these entities' senior unsecured creditors continue to be paid on time and in full if the group fails.

We would likely revise the outlook back to stable if the group's accumulation of ALAC seems set to be delayed or fall short. This revision could also result

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote from reduced confidence that a higher rating is justified in comparison with similarly highly-rated peers, for example due to mounting downside risks of the type envisaged under the downside scenario mentioned above for Standard Chartered PLC.

BICRA SCORE SNAPSHOT*

U.K. To From

BICRA Group 3 3

Economic risk 4 4 Economic resilience Low risk Very Low risk Economic imbalances Intermediate risk Intermediate risk Credit risk in the economy High risk High risk

Industry risk 3 3 Institutional framework Intermediate risk Intermediate risk Competitive dynamics Intermediate risk Intermediate risk Systemwide funding Low risk Low risk

Trends Economic risk trend Negative Positive Industry risk trend Stable Stable

*Banking Industry Country Risk Assessment (BICRA) economic risk and industry risk scores are on a scale from 1 (lowest risk) to 10 (highest risk). For more details on our BICRA scores on banking industries across the globe, please see "Banking Industry Country Risk Assessment Update" published monthly on RatingsDirect.

RATINGS LIST

******************************* Barclays PLC *******************************

Ratings Affirmed; CreditWatch/Outlook Action To From Barclays PLC Counterparty Credit Rating BBB/Negative/A-2 BBB/Stable/A-2

Barclays Bank Ireland PLC Barclays Private Clients International Ltd. Barclays Capital Inc. Barclays Bank plc (Milan Branch) Barclays Bank plc (Madrid Branch) Barclays Bank PLC Counterparty Credit Rating A-/Negative/A-2 A-/Stable/A-2

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Barclays Bank PLC (Taipei Branch) Counterparty Credit Rating Taiwan National Scale twAA/Negative/twA-1+ twAA/Stable/twA-1+

Downgraded To From Barclays Bank PLC Counterparty Credit Rating Greater China Regional Scale cnAA-/--/-- cnAA/--/--

Barclays Bank PLC Senior Unsecured cnAA- cnAA

Ratings Affirmed Barclays Bank PLC Certificate Of Deposit Local Currency A-/A-2

Barclays PLC Senior Unsecured BBB Subordinated BB+ Junior Subordinated B+

Barclays Bank PLC Senior Unsecured A- Senior Unsecured A-p Senior Unsecured BBB- Subordinated BB+ Subordinated BBB- Junior Subordinated BB Junior Subordinated BB+ Junior Subordinated BBB- Preference Stock BB Short-Term Debt A-2 Certificate Of Deposit A- Certificate Of Deposit A-2 Commercial Paper A-2

Barclays Bank PLC (Australian Branch) Barclays Bank PLC (Hong Kong Branch) Barclays Bank PLC (New York Branch) Barclays Bank PLC (Singapore Branch) Barclays Bank PLC (Tokyo Branch) Barclays U.S. Funding Corp. Barclays US Funding LLC Commercial Paper A-2

Barclays Financial LLC Senior Unsecured A-

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

************************** Bradford & Bingley PLC **************************

Ratings Affirmed

Bradford & Bingley PLC Counterparty Credit Rating --/--/A-1

*********************** Clydesdale Bank PLC ***********************

Ratings Affirmed; CreditWatch/Outlook Action To From Clydesdale Bank PLC Counterparty Credit Rating BBB+/Negative/A-2 BBB+/Stable/A-2

CYBG PLC Counterparty Credit Rating BBB-/Negative/A-3 BBB-/Stable/A-3

Ratings Affirmed Clydesdale Bank PLC Commercial Paper A-2

CYBG PLC Subordinated BB Junior Subordinated B

**************************** HSBC Holdings PLC ***************************

Ratings Affirmed; CreditWatch/Outlook Action To From HSBC Bank PLC HSBC Securities (USA) Inc. HSBC France HSBC Bank USA N.A. HSBC Bank Canada Counterparty Credit Rating AA-/Negative/A-1+ AA-/Stable/A-1+

HSBC Holdings PLC HSBC USA Inc. HSBC Finance Corp. Counterparty Credit Rating A/Negative/A-1 A/Stable/A-1

Ratings Affirmed

HSBC Bank (Taiwan) Ltd. Counterparty Credit Rating A+/Stable/A-1 Greater China Regional Scale cnAAA/--/cnA-1+ Taiwan National Scale twAAA/Stable/twA-1+

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

HSBC Bank A.S. Counterparty Credit Rating BB/Negative/B Turkey National Scale trAA-/--/trA-1

HSBC Bank Australia Ltd. Counterparty Credit Rating A+/Stable/A-1

HSBC Bank Bermuda Ltd. Counterparty Credit Rating A-/Negative/A-2

HSBC Bank Canada Certificate Of Deposit Foreign Currency AA-/A-1+

HSBC France Certificate Of Deposit Foreign Currency AA- Local Currency AA-/A-1+

Hang Seng Bank (China) Limited Counterparty Credit Rating AA-/Negative/A-1+ Greater China Regional Scale cnAAA/--/cnA-1+

Hang Seng Bank Limited The Hongkong and Shanghai Banking Corp. Ltd. Counterparty Credit Rating AA-/Stable/A-1+ Greater China Regional Scale cnAAA/--/cnA-1+

The Hongkong and Shanghai Banking Corp. Ltd. Certificate Of Deposit Foreign Currency AA-/A-1+

The Saudi British Bank Counterparty Credit Rating BBB+/Stable/A-2

HSBC Bank PLC Senior Unsecured A+ Senior Unsecured AA- Senior Unsecured AA-p Subordinated A- Junior Subordinated BBB+ Commercial Paper A-1+

HSBC Holdings PLC Senior Unsecured A Subordinated BBB+ Junior Subordinated BBB- Preference Stock BBB-

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

HSBC Bank (Taiwan) Ltd. Senior Unsecured twAAA

HSBC Bank Australia Ltd. Senior Unsecured A+ Subordinated A Commercial Paper A-1

HSBC Bank Canada Senior Unsecured AA- Subordinated A- Preferred Stock BBB Preferred Stock P-2 Short-Term Debt A-1+ Certificate Of Deposit A-1+ Certificate Of Deposit AA-

HSBC Bank Capital Funding (Sterling 1) L.P. Preferred Stock BBB

HSBC Bank Capital Funding (Sterling 2) L.P. Preferred Stock BBB

HSBC Bank USA N.A. Senior Unsecured AA- Subordinated A

HSBC Capital Funding (Dollar 1) L.P. Preferred Stock BBB-

HSBC Capital Funding (Euro 3) L.P. Preferred Stock BBB-

HSBC Finance Corp. Senior Unsecured A Subordinated A- Preferred Stock BBB- Commercial Paper A-1

HSBC France Senior Unsecured AA- Certificate Of Deposit A-1+

HSBC USA Capital Trust I Preferred Stock BBB-

HSBC USA Capital Trust II Preferred Stock BBB-

HSBC USA Inc.

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Senior Unsecured A Subordinated A- Preferred Stock BBB- Commercial Paper A-1

The Hongkong and Shanghai Banking Corp. Ltd. Senior Unsecured AA- Senior Unsecured cnAAA Certificate Of Deposit A-1+

The Hongkong and Shanghai Banking Corp. Ltd. (Sydney Branch) Senior Unsecured AA-

************************* Lloyds Banking Group PLC *************************

Ratings Affirmed; CreditWatch/Outlook Action To From Lloyds Banking Group PLC HBOS PLC Counterparty Credit Rating BBB+/Negative/A-2 BBB+/Stable/A-2

Bank of Scotland PLC Lloyds Bank PLC Counterparty Credit Rating A/Negative/A-1 A/Stable/A-1

Ratings Affirmed Bank of Scotland PLC Certificate Of Deposit Foreign Currency A/A-1 Local Currency A/A-1

Lloyds Bank PLC Certificate Of Deposit A/A-1

Lloyds Banking Group PLC Senior Unsecured BBB+ Subordinated BBB- Junior Subordinated BB+ Junior Subordinated BB- Preference Stock BB

Bank of Scotland Capital Funding L.P. Preferred Stock BB+

Bank of Scotland PLC Senior Unsecured A Senior Unsecured Ap Subordinated BBB Junior Subordinated BB+

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

Junior Subordinated BBB-

HBOS Capital Funding L.P. Junior Subordinated BB Preferred Stock BB

HBOS Capital Funding No. 1 L.P. Preference Stock BB

HBOS Capital Funding No. 3 L.P. Preferred Stock BB

HBOS Capital Funding No. 4 L.P. Junior Subordinated BB

HBOS PLC Subordinated BBB- Junior Subordinated BB+

Halifax Group Euro Finance (Jersey) L.P. Preferred Stock BB

Halifax Group Sterling Finance (Jersey) L.P. Preferred Stock BB

LBG Capital No. 1 PLC Subordinated BBB- Junior Subordinated BB+

LBG Capital No. 2 PLC Subordinated BBB

Lloyds Bank Capital 2 L.P. Preferred Stock BB+

Lloyds Bank PLC Senior Unsecured A Senior Unsecured Ap Senior Unsecured cnAA+ Subordinated BBB Junior Subordinated BB+ Junior Subordinated BBB- Certificate Of Deposit A-1 Commercial Paper A-1

*********************** Nationwide Building Society **********************

Ratings Affirmed; CreditWatch/Outlook Action

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

To From Nationwide Building Society Counterparty Credit Rating A/Negative/A-1 A/Stable/A-1

Ratings Affirmed

Nationwide Building Society Senior Unsecured A Subordinated BBB Junior Subordinated BB+ Certificate Of Deposit A Certificate Of Deposit A-1 Commercial Paper A-1

Law Debenture Intermediary Corp. PLC (The) Junior Subordinated BB+

*******************Santander UK Group Holdings PLC ***********************

Ratings Affirmed; CreditWatch/Outlook Action To From Santander UK PLC Counterparty Credit Rating A/Negative/A-1 A/Stable/A-1

Ratings Affirmed

Santander UK Group Holdings PLC Counterparty Credit Rating BBB/Stable/A-2

Santander UK Group Holdings PLC Senior Unsecured BBB Subordinated BB+ Junior Subordinated B+

Abbey National Capital Trust I Preferred Stock BB

Abbey National North America LLC Commercial Paper A-1

Abbey National Treasury Services PLC Senior Unsecured A Certificate Of Deposit A-1 Commercial Paper A-1

Abbey National Treasury Services PLC (Hong Kong branch) Certificate Of Deposit A

Santander UK PLC

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Senior Unsecured A Subordinated BBB- Junior Subordinated BB Junior Subordinated BB+ Preferred Stock BB Preference Stock BB

************************** Standard Chartered PLC **************************

Ratings Affirmed

Standard Chartered PLC Counterparty Credit Rating BBB+/Stable/A-2

Standard Chartered Bank Counterparty Credit Rating A/Positive/A-1

Standard Chartered Bank (China) Ltd. Counterparty Credit Rating A/Positive/A-1 Greater China Regional Scale cnAAA/--/cnA-1+

Standard Chartered Bank (Hong Kong) Ltd. Counterparty Credit Rating A+/Positive/A-1 Greater China Regional Scale cnAAA/--/cnA-1+

Standard Chartered Bank (Taiwan) Ltd. Counterparty Credit Rating A-/Positive/A-2 Greater China Regional Scale cnAA+/--/cnA-1 Taiwan National Scale twAA/Positive/twA-1+

Standard Chartered Bank Korea Ltd. Counterparty Credit Rating A-/Positive/A-2

Standard Chartered PLC Senior Unsecured BBB+ Subordinated BBB- Junior Subordinated BB- Preference Stock BB

Standard Chartered Bank Senior Unsecured A Senior Unsecured Ap Senior Unsecured cnAAA Subordinated BBB Junior Subordinated BB+ Junior Subordinated BBB- Preferred Stock BB+ Certificate Of Deposit A Certificate Of Deposit A-1 Certificate Of Deposit axA-1+

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Certificate Of Deposit axAAA Commercial Paper A-1

Standard Chartered Bank (Hong Kong) Ltd. Senior Unsecured A+ Senior Unsecured cnAAA Subordinated A Subordinated cnAA+

******************* The Royal Bank of Scotland Group PLC *******************

Ratings Affirmed; CreditWatch/Outlook Action To From The Royal Bank of Scotland Group PLC Counterparty Credit Rating BBB-/Stable/A-3 BBB-/Positive/A-3

National Westminster Bank PLC The Royal Bank of Scotland PLC The Royal Bank of Scotland N.V. Royal Bank of Scotland PLC (Connecticut Branch) (The) Royal Bank of Scotland N.V. (Milan Branch) RBS Securities Inc. Counterparty Credit Rating BBB+/Stable/A-2 BBB+/Positive/A-2

Ulster Bank Ireland DAC Ltd. Counterparty Credit Rating BBB/Stable/A-2 BBB/Positive/A-2

Downgraded To From The Royal Bank of Scotland PLC Senior Unsecured cnA+ cnAA-

Ratings Affirmed The Royal Bank of Scotland N.V. Certificate Of Deposit Foreign Currency BBB+/A-2

The Royal Bank of Scotland PLC Certificate Of Deposit Foreign Currency BBB+/A-2 Local Currency BBB+/A-2

Ulster Bank Ireland DAC Certificate Of Deposit BBB/A-2

The Royal Bank of Scotland Group PLC Senior Unsecured BBB- Subordinated BB Junior Subordinated B

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Junior Subordinated B+ Junior Subordinated BB- Preferred Stock B+ Preference Stock B+ Commercial Paper A-3

National Westminster Bank PLC Subordinated BB+ Junior Subordinated BB Junior Subordinated BB- Preference Stock BB-

RBS Capital Funding Trust V Preferred Stock BB-

RBS Capital Funding Trust VI Preferred Stock BB-

RBS Capital Funding Trust VII Preferred Stock BB-

RBS Capital Trust B Preferred Stock B+

RBS Capital Trust C Preferred Stock B+

RBS Capital Trust D Preferred Stock B+

RBS Capital Trust II Preferred Stock B+

RBS Holdings USA Inc. Commercial Paper A-2

The Royal Bank of Scotland N.V. Senior Unsecured BBB+ Subordinated BB+ Certificate Of Deposit A-2 Certificate Of Deposit BBB+

The Royal Bank of Scotland PLC Senior Unsecured BBB+ Senior Unsecured BBB+p Subordinated BB+ Junior Subordinated BB Certificate Of Deposit A-2 Commercial Paper A-2

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Ulster Bank Finance PLC Commercial Paper A-2

Ulster Bank Ireland DAC Certificate Of Deposit A-2

RELATED CRITERIA AND RESEARCH Related criteria • Criteria - Financial Institutions - Banks: Bank Hybrid Capital And Nondeferrable Subordinated Debt Methodology And Assumptions - January 29, 2015 • General Criteria: Rating Government-Related Entities: Methodology And Assumptions - March 25, 2015 • General Criteria: Principles For Rating Debt Issues Based On Imputed Promises - December 19, 2014 • General Criteria: S&P Global Ratings' National And Regional Scale Mapping Tables - June 01, 2016 • General Criteria: Standard & Poor's National And Regional Scale Mapping Tables - September 30, 2014 • General Criteria: Group Rating Methodology - November 19, 2013 • General Criteria: Use Of CreditWatch And Outlooks - September 14, 2009 • Criteria - Financial Institutions - Banks: Revised Market Risk Charges For Banks In Our Risk-Adjusted Capital Framework - June 22, 2012 • Criteria - Financial Institutions - Banks: Assessing Bank Branch Creditworthiness - October 14, 2013 • Criteria - Financial Institutions - Banks: Bank Rating Methodology And Assumptions: Additional Loss-Absorbing Capacity - April 27, 2015 • Criteria - Financial Institutions - Banks: Methodology For Mapping Short- And Long-Term Issuer Credit Ratings For Banks - May 04, 2010 • Criteria - Financial Institutions - Banks: Commercial Paper I: Banks - March 23, 2004 • Criteria - Financial Institutions - Banks: Quantitative Metrics For Rating Banks Globally: Methodology And Assumptions - July 17, 2013 • Criteria - Financial Institutions - Banks: Bank Capital Methodology And Assumptions - December 06, 2010 • Criteria - Financial Institutions - Banks: Banking Industry Country Risk Assessment Methodology And Assumptions - November 09, 2011 • Criteria - Financial Institutions - Banks: Banks: Rating Methodology And Assumptions - November 09, 2011 • Legal Criteria: Guarantee Criteria—Structured Finance – May 07, 2013

Related research • Ratings On The Lowered To 'AA' On Brexit Vote; Outlook Remains Negative On Continued Uncertainty, 27-Jun-2016 • Major U.K. Banks Are Nearing The End Of The Road For Mega Conduct And Litigation Charges, 26-Apr-2016 • Low Credit Losses For Even Longer: The Silver Lining For U.K. Banks, 05-Apr-2016 • U.K. Banks Face Up To Brexit Uncertainty, 14-Mar-2016

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1670372 | 300043332 Various U.K. Bank Outlooks Revised Due To Potential Economic Deterioration Following Brexit Vote

• U.K. Banks' Proposed Bail-In Buffers And Resolution Paths Largely Support Our Rating Assumptions, 19-Feb-2016 • U.K. Banks: What's On The Cards For 2016, 20-Jan-2016 • U.K. Banks Mostly Untroubled By The Latest Regulatory Stress Test And Appear Well-Placed For Future Capital Requirements, 01-Dec-2015 • Ratings On U.K. Banks Remain Unaffected By CMA Retail Banking Market Investigation, 22-Oct-2015 • How Might Ring-Fencing Move The Dial For U.K. Bank Ratings? 16-Oct-2015 • The U.K.'s "Challenger Banks": A Label That Deserves A More Nuanced Understanding, 08-Sep-2015 • U.K. Banks' Rising Capital Strength Doesn't Necessarily Mean Ratings Upgrades Are Likely, 10-Aug-2015 • Brexit Risk For The U.K. And Its Financial Services Sector: It's Complicated, 23-Jun-2015

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

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at spcapitaliq.com. All ratings affected by this rating action can be found on the S&P Global Ratings public website at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following S&P Global Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009.

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