Moody’s may cut ratings on UK lenders

Credit rating agency Moody’s may cut its rating on 14 British lenders, including Lloyds and Royal Bank of Scotland, because UK regulators appear less willing to bail out banks in the future.

The companies which could be downgraded by Moody’s also included Bank of Ireland UK, Co-Operative Bank, Coventry Building Society and Nationwide Building Society, the agency said in a statement on Tuesday.

Moody’s added it may also cut Newcastle Building Society, Norwich & Peterborough Building Society, Nottingham Building Society, Principality Building Society, Santander UK, Skipton Building Society, West Bromwich Building Society and Yorkshire Building Society.The rating agency also kept a “negative” outlook on HSBC.

Hide Ad
Hide Ad

“The reassessment is not driven by either a deterioration in the financial strength of the banking system or that of the government,” said Elisabeth Rudman, a Moody’s Senior Credit Officer and lead analyst for a number of UK banks.

“It has been initiated in response to ongoing guidance from the UK authorities (the Bank of England, the Financial Services Authority and the Treasury) that banks that fail in the future should not expect capital injections from the public purse,” she added.

Moody’s had already said in April that it could cut its ratings for Britain’s smaller banks as it assessed how they would fare without a tacit understanding that the government would always bail them out if they got into financial trouble.

Rival rating agency Fitch had also said last month that British banks faced more challenging macroeconomic conditions this year, although Fitch added that the top UK banks’ balance sheets had become stronger.