13.10.2011
By Simon Miller
Fitch Ratings has downgraded two of the top four UK high street banks and put another on a negative watch.
The rating's agency downgraded Lloyds TSB and RBS to 'A' from 'AA-' while placing Barclays on a negative watch - HSBC emerged unscathed.
The downgrades came as a result of Fitch lowering its Support Rating Floors for systemically important UK banks to 'A' from 'AA-' and 'A+'.
In a statement the ratings agency said: "The revision of the SRFs reflects Fitch's view that support dynamics are changing in the UK. The banking system is not only large relative to the UK economy, but there is also more advanced political will to reduce the implicit support for the country's banks, building on The Banking Act 2009 and, more recently the various policy recommendations of the Independent Commission on Banking."
It continued: "The downgrades of [Lloyds] and [RBS] reflect the revision of their SRF as their current VRs are below that (both at 'bbb'). Both of these banking groups have shown steady improvement in their risk profiles and prospects over the past two years and, assuming there is no major fallout from the euro zone crisis, for example, ought to be able to achieve higher VRs over the medium- and long-term."
Fitch said that placing Barclays on a negative watch reflected the view "that global trading and universal banks have business models that are particularly sensitive to market sentiment and confidence, that are complex and exposed to greater volatility. They will be resolved in a reasonably short timeframe".
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