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Moody's downgrades 12 UK financial institutions
by Dylan Lobo on Oct 07, 2011 at 08:12
Moody's has downgraded the senior debt and deposit ratings of 12 UK financial institutions, including Lloyds and RBS, and warned the government is now more likely to let smaller firms fail.
The downgrades conclude its review of the systemic support assumptions from the UK government for these institutions started on 24 May 2011.
The rating actions include a one-notch downgrade of Lloyds TSB Bank (to A1 from Aa3), Santander UK (to A1 from Aa3), Co-Operative Bank (to A3 from A2), a two-notch downgrade of RBS (to A2 from Aa3) and Nationwide Building Society (to A2 from Aa3); and downgrades of one to five notches of seven smaller building societies.
It has also downgraded of one to five notches of seven smaller building societies; Newcastle, Norwich & Peterborough, Nottingham, Principality, Skipton, West Bromwich and Yorkshire.
'There is insufficient certainty surrounding the likelihood and extent of support available over the medium-term to the senior creditors of rated building societies smaller than Nationwide,' Moody's said.
The downgrades have been caused by Moody's reassessment of the support environment in the UK which has resulted in the removal of support for seven smaller institutions and the reduction of support by one to three notches for five larger, more systemically important financial companies.
According to Moody's, announcements made, as well as actions already taken by UK authorities have significantly reduced the predictability of support for the banks and building societies over the medium to long-term.
Moody's believes the government is likely to continue to provide some level of support to systemically important financial institutions, which continue to incorporate up to three notches of uplift.
However, it said the government is more likely to now allow smaller institutions to fail if they become financially troubled.
'The downgrades do not reflect a deterioration in the financial strength of the banking system or that of the government,' Moody's said.
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8 comments so far. Why not have your say?
Peter Morris b
Oct 07, 2011 at 08:45
When in Opposition, the Tories said they would have let Northern Rock and the other banks fail, instead of propping them up with taxpayers' money.
George Osborne said that Quantative Easing was "a desperate act by a desperate government", when it was done under Labour. He is nowhere to be seen in the latest round of QE of £75 billion.
It appears the Tory led coalition government may be prepared to let the smaller building societies fail now.
I would have thought the Tories would become more responsible when in government but apparently not.
report thisl'ifa passeport en provenance de France
Oct 07, 2011 at 09:03
World war three ? played out in the markets....oh dear! come on the euro start fighting back
report thisJohn Whipple
Oct 07, 2011 at 09:32
"The downgrades do not reflect a deterioration in the financial strength of the banking system or that of the government,' Moody's said.
Liars...or just messing around with peoples lives?
Where do you put money now ? Remember that Icelandic banks were rated higher the just before they went pop.
Fitch has today downgraded Kaupthing Bank's credit ratings. The
Bank's Long-term Issuer Default Rating (IDR) has been downgraded one
notch from A to A- (09/05/2008)
report thisDavid Wardle
Oct 07, 2011 at 09:41
£85,000 maximum per person per institution to be safe...
report thisBob Donaldson
Oct 07, 2011 at 10:12
Never has the job of advising clients on deposits been so hard. It will be interesting if one fails if advisors carry the can for it.
report thisJNP
Oct 07, 2011 at 10:41
No downgrade for Barclays or HSBC I notice - the 2 big institutions that did not require a government bail-out in the first place.
report thisJNP
Oct 07, 2011 at 10:42
I don't think advising on deposits is hard - we just need to make sure clients are aware of the circumstances. £85k per institution per person adds up to a lot of cash if you spread it between institutions, albeit a bit of a hassle.
report thisPeter Morris b
Oct 07, 2011 at 11:16
Barclays did require a bail out but did not like the government's conditions, so they went to the Arab nations for a bail out. Turned out OK for them but still a bit of a gamble I think.
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