London, 24 June 2012 -- Moody's Investors Service has today downgraded the long-term local and foreign-currency deposit ratings of HSBC Bank Middle East Limited (HBME) by one notch to A2 from A1 and affirmed the C- bank financial strength rating (BSFR), which has been remapped to a standalone credit assessment to baa2 from baa1. All ratings carry a stable outlook. This rating action concludes the review initiated by Moody's on 21 February 2012.

Today's rating action reflects the rating downgrade of HBME's parent HSBC Holdings plc, which indicates a reduced capacity of the parent bank to provide capital and funding support to its subsidiary, as well as HBME's performance relative to regional and similarly rated global peers (for more information on the rating action on HSBC Holdings plc, please see Moody's press release "Moody's downgrades firms with global capital markets operations" published on 21 June 2012).

The bank ratings affected by today's announcement are listed at the end of the press release.

RATINGS RATIONALE

--PARENTAL SUPPORT CONSIDERATIONS

Under Moody's joint-default analysis methodology, subsidiaries' debt and deposit ratings may incorporate notching uplifts from their standalone ratings, owing to the assessment of parental support. The weakening in the capacity of HSBC Holdings plc to provide capital and funding support, as reflected in Moody's assessment of the intrinsic financial strength of the group as equivalent to a1 (previously aa3), contributed to the downgrade on HBME's ratings.

Moody's notes, however, that HBME's A2 long-term debt and deposit ratings continue to incorporate three-notches of uplift from Moody's assessment of a very high probability of support for HBME from its parent, in case of need. HBME is a wholly owned subsidiary of HSBC Holdings plc, registered in the Channel Islands, with operations in the Middle East.

--STANDALONE FINANCIAL STRENGTH of C- AFFIRMED; REMAPPED To baa2

The affirmation of the BFSR is supported by HBME's strong regional franchise in the Middle East and its strong liquidity and profitability metrics. The lowering of the standalone credit assessment to baa2, the lower half of the C- range, is driven by the relative performance of asset quality and capital metrics which are materially lower than regional peers.

Despite the recent easing of HBME's problem-loan levels to around 10.6% in 2011, they still remain significantly above the 1-3% of its baa1 peer group. As a reflection of these sustained asset quality pressures, the ratio of loan loss reserves to problem loans is currently at 62% (as of year-end 2011) compared to levels in excess of 100% for almost all its baa1 and baa2 peers.

Finally, while recognising the funding benefits of the group structure through the supported rating, on a standalone basis HBME has a tier 1 capital ratio of 10.6% versus the 11-23% range of other regional banks as of year-end 2011.

--STABLE OUTLOOK

HBME's ratings now carry a stable outlook, as the ratings are well supported by the bank's core income-generating ability, a growing and diversifying regional franchise -- particularly in core areas such as global trade finance and corporate banking -- as well as favourable liquidity and funding position. The bank's low loan-to-deposit ratio was estimated at 75% versus the UAE average of around 100% at the end of 2011.

--WHAT COULD CHANGE THE RATING UP / DOWN

HBME's ratings could be upgraded from a combination of the following events: (i) a material reduction in single-name borrower concentration and in geographical concentration to the UAE; (ii) material improvements in the bank's asset quality; and (iii) a sustained strengthening of the bank's capital base.

The ratings could come under pressure from a combination of one or more of the following events: (i) a further deterioration in loan quality stemming from other large corporate defaults; (ii) a significant weakening of the bank's regional franchise; or (iii) in the event of major geopolitical instability in the Middle East.

LIST OF AFFECTED RATINGS

..Issuer: HSBC Bank Middle East Limited

....Multiple Seniority Medium-Term Note Program, Downgraded to (P)A2, (P)A3 from (P)A1, (P)A2

....Senior Unsecured Regular Bond/Debenture, Downgraded to A2 from A1

....Senior Unsecured Deposit Rating, Downgraded to A2 from A1

....Standalone BFSR affirmed at C- (remapped to baa2)

....Outlooks on all Long Term Ratings Changed To Stable

.Short Term Deposit Ratings Confirmed at P-1

..Issuer: HSBC Bank Middle East Limited (UAE Branch)

....Senior Unsecured Deposit Rating, Downgraded to A2 from A1

....Outlooks on all Long Term Ratings Changed To Stable

.Short Term Deposit Ratings Confirmed at P-1

..Issuer: HBME Sukuk Company Ltd

....Senior Unsecured Medium-Term Note Program, Downgraded to (P)A2 from (P)A1

....Senior Unsecured Regular Bond/Debenture, Downgraded to A2 from A1

.... Outlooks on all Long Term Ratings Changed To Stable

The principal methodologies used in these ratings were Bank Financial Strength Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The ratings have been disclosed to the rated entities or their designated agents and issued with no amendment resulting from that disclosure.

Information sources used to prepare the ratings are the following : parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entities or their related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Khalid F. Howladar VP - Senior Credit Officer Financial Institutions Group Moody'sInvestors Services Limited, Dubai Branch Gate Precinct 3, Level 3 P.O. Box 506845 DIFC - DubaiUAE Telephone: 00971 4237 9536 Yves J Lemay MD - Banking Financial Institutions Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED,DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error negligent or otherwise or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."

Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001.

Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. ("MJKK") are MJKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, "MIS" in the foregoing statements shall be deemed to be replaced with "MJKK". MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO.

This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.