Moody’s Investor Service has cut the long-term debt and
deposit ratings for six German banking groups and the German subsidiary of a
foreign bank, while ratings for another group have been confirmed.

The international rating agency also cut the long-term debt
and deposit ratings for several subsidiaries of these groups, by up to three
notches. At the same time, the short-term ratings for three groups as well as one
German subsidiary of a foreign group have been downgraded by one notch,
triggered by the long-term rating downgrades.

“Further to these actions, Moody's has assigned stable
outlooks to the ratings of most German banks. The ratings of two groups and of one
German subsidiary of a foreign bank carry negative outlooks, reflecting
bank-specific vulnerabilities to a possible further deterioration of the
environment,” it said.

Moody’s said it will conclude its rating review of Deutsche
Bank – Germany’s biggest bank and a significant wealth management business –
together with reviews for other global firms with large capital markets
operations.

Risks

“Today's rating actions are driven by the increased risk of
further shocks emanating from the euro area debt crisis, in combination with
the banks' limited loss-absorption capacity,” the rating agency said in a
statement yesterday.

The (asset-weighted) average deposit rating of German banks
of A2 now falls in the mid-range for western European banking systems, Moody’s
said.

“The average standalone credit assessment of baa3 ranks in
the mid-to-lower range compared with European peers. Moody's has not changed
its assumptions about the likelihood of support from external sources, such as
parent owners, broader sector groups, and governments,” it said.

“Reflecting these support assumptions, many German banks'
debt and deposit ratings continue to be positioned several notches above their
standalone credit assessments,” it said.

Banks affected by the ratings cuts included: Commerzbank; Deutsche
Schiffsbank; Eurohypo; Dekabank Deutsche Girozentrale; DZ Bank Deutsche
Zentral-Genossenschaftsbank; DVB Bank, Landesbank Baden-Wuerttenberg, Landesbank
Hessen-Thüringen and Norddeutsche Landesbank Girozentrale.