Moody’s downgrades 12 UK financial institutions highlighting weakening systemic support
Moody’s announced rating downgrades for 12 financial institutions in the UK, reflecting growing uncertainties over the government’s willingness to prop up failing banks. October 10, 2011 | Wong Wei HanLate last month, Moody’s rocked an already shaken financial world with the downgrade of three major US banks, citing as reason the lower possibility of government bail-outs. Similar concerns of diminishing government support were behind that rationale of Moody’s decisions as the agency announced on October 7th the downgrading of senior debt and deposit ratings for 12 financial institutions in the UK. The announcements mark the conclusion of Moody’s review of assumptions on mid-to-long term systemic support extended by the UK government, which originally began in May this year. On the list of financial institutions affected by Moody’s cut are five larger and systematically important banks, including Lloyds TSB Bank, Satander UK, Co-operative Bank, Royal Bank of Scotland and Nationwide Building Society. These institutions lost between one to two notches in their ratings, with Lloyds and Santander UK being downgraded to A1 from Aa3 while RBS saw its rating drop from Aa3 to A2. Seven other smaller institutions were also hit by downgrades of between one to five notches. These include building societies Newcastle, Norwich & Peterborough, Nottingham, Principality, Skipton, West Bromwich and Yorkshire. The rating downgrades were the direct result of Moody’s assessment of the probability that financial institutions in the UK will receive systemic support from the government when failing. Moody’s believes that the support environment in the UK is gradually weakening as ongoing guidance from the UK Tripartite authorities (the Bank of England, the Financial Services Authority and the Treasury) indicates that the government may in the future make greater use of its resolution tools to allow burden with senior bondholders. Moody’s did not equate the downgrades with a deterioration in the financial strength of UK’s banking system, noting in its report that standalone ratings of five banks on the list (Co-operative Bank, Nationwide, Santander ... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Capital & Strategic Issues, Results & Ratings, Risk and RegulationCapital & Strategic Issues,rating,Risk and Regulation, Capital & Strategic Issues,Results & Ratings,Risk and Regulation, Keywords:Lloyds TSB, Satander UK, Cooperative Bank, RBS, Nationwide Building Society, Moody's, UK Lloyds TSB, Satander UK, Cooperative Bank, RBS, Nationwide Building Society, Moody's, UK
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