Moody’s downgrades 12 UK banks

| October 7, 2011

Credit ratings agency Moody’s has today downgraded 12 UK financial institutions.

The news sent banking shares down in morning trading today with Royal Bank of Scotland (RBS) and Lloyds down by around 3.5%.

Moody’s cut its rating on state-owned banks RBS by two notches from Aa3 to A2 and Lloyds TSB by one notch from Aa3 to A1.

Furthermore, it downgraded the UK division of Spanish banking giant, Santander, by one notch to A1 from Aa3, while the Nationwide Building Society had its rating cut by two notches to A2 from Aa3.

Other institutions which suffered a cut were Co-operative Bank, and the building societies Newcastle, Norwich & Peterborough, Nottingham, Principality, Skipton, West Bromwich and Yorkshire.

Moody’s added that it did not downgrade HSBC, Barclays or Standard Chartered.

It also highlighted that the downgrades did not “reflect a deterioration in the financial strength of the banking system”.

In a statement, it said: “The downgrades have been caused by Moody’s reassessment of the support environment in the UK which has resulted in the removal of systemic support for seven smaller institutions and the reduction of systemic support… for five larger, more systemically important financial institutions.”

In response to the downgrades, RBS said it was “disappointed that Moody’s had not acknowledged the progress we have made in strengthening the bank’s credit profile”.

Meanwhile, Lloyds said it would “have minimal impact on our funding costs”.

Chancellor George Osborne commented: “As I understand it, one of the reasons they are doing this, is because they think the British Government is actually moving in the direction of trying to get away from guaranteeing all the largest banks in Britain.

“I’m confident that British banks are well capitalised, they are liquid, they are not experiencing the kinds of problems that some of the banks in the Eurozone are experiencing at the moment,” he added.

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