24.5.2011

By Simon Miller

Rating agency Moody's has warned that 14 UK banks could be downgraded after the British financial authorites dismissed ideas of further bailouts from the public purse.

The British banks could be downgraded as a result of a review into what systemic support they had already received from the UK government and regulators.

Elisabeth Rudman, one of Moody's senior credit officer, said that the reassessment was not as a result of poor health in the financial system.

"The reassessment is not driven by either a deterioration in the financial strength of the banking system or that of the government," she said in a guidance note.

Rudman added: "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."

The review is in line with recent financial institution rating actions in several European countries. Moody's has placed under review for possible downgrade the long-term ratings of UK financial institutions which - in Moody's assessment - "incorporate levels of government, or systemic support in their ratings that the rating agency may now deem to be too high for the evolving post-crisis environment".

The review is likely to take three months but the outlook on the Aa3 senior debt and deposit ratings of Barclays Bank plc has already been changed to negative from stable and the Aa2 senior debt and deposit ratings of HSBC Holdings and HSBC Bank plc have been affirmed with a negative outlook.


The 14:
• Royal Bank of Scotland
• Santander UK
• Lloyds TSB Bank
• Bank of Ireland UK
• Co-Operative Bank
• Coventry Building Society
• Nationwide Building Society
• Newcastle Building Society
• Norwich & Peterborough Building Society
• Nottingham Building Society
• Principality Building Society
• Skipton Building Society
• West Bromwich Building Society
• Yorkshire Building Society