Perilous
Times
Moody's downgrades a dozen UK banks
* From: AP
* October 07, 2011 10:08PM
A DOZEN British banks saw their credit ratings downgraded today
over doubts over the strength of the government's support, in
another sign that the banking sector is facing renewed stresses.
Moody's Investors Service insisted that its downgrades have
nothing to do with any worsening in the financial strength of the
sector or over the state of the government's public finances as
economic growth stalls.
A near standstill in growth prompted the Bank of England yesterday
to launch a $119.72 billion monetary stimulus.
Among the downgrades, Moody's reduced its rating on
government-controlled Royal Bank of Scotland PLC by two notches to
A2. It also cut its rating on Lloyds TSB Bank, a unit of
part-nationalised Lloyds Banking Group PLC by one notch to A1.
Spain's Banco Santander SA had its British business downgraded by
one notch to A1, while Nationwide Building Society suffered a
two-notch reduction to A2. However, there were no changes in the
ratings of Barclays PLC and HSBC PLC.
Shares in Lloyds and Royal Bank fell in early trading London
Friday, underperforming the wider FTSE 100 index. Lloyds was down
3 per cent, while Royal Bank fell 4 per cent.
While the agency believes that the British government will
continue to provide some support to systemically important
financial institutions, it said it is more likely to allow smaller
institutions to fail.
"The downgrades do not reflect a deterioration in the financial
strength of the banking system or that of the government," Moody's
said.
RBS said it was disappointed that "Moody's have not acknowledged
the progress we have made in strengthening the bank's credit
profile."
"We do, however, see the removal of implicit government support
for the UK banking sector as being a necessary and important step
forward as the sector returns to standalone strength," it added.
Treasury chief George Osborne said the downgrades reflected the
government's determination to move away from guaranteeing all the
big banks.
"People ask me, how are you going to avoid Britain and the British
taxpayer bailing out banks in the future? This government is
taking steps to do that," he said in a BBC radio interview.
"Therefore credit rating agencies and others will say, well
actually these banks have got to show they can pay their way in
the world."