Moody’s Downgrades British Banks

22 June 2012 14:00 - Florence Fullalove


Moody’s Downgrades British Banks

The ratings agency Moody’s has lowered its assessments of 15 major world banks including Royal Bank of Scotland, Barclays, Lloyds Banking Group and HSBC in the UK. RBS saw its rating cut from A3 to Baa1, Barclays from A1 to A3 and HSBC from Aa2 to Aa3. The downward move reflects fears that the bank’s growth and profit prospects are declining. Moody’s said that it was especially concerned about banks with significant capital market activities – heavy trading involvement in wholesale money markets. Moody’s global banking manager director Greg Bauer said in a statement, “All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities.” The other institutions that have been downgraded include Credit Suisse, UBS, BNP Paribas, Credit Agricole, Societe Generale, Deutsche Bank, Royal Bank of Canada, Bank of America and Morgan Stanley.

Some banks were put on a negative outlook, which is a warning that they could be downgraded again later, on the basis that governments may eventually withdraw their support. In the report, Moody’s recognised the “the clear intent of governments around the world to reduce support for creditors,” but said they had not yet put frameworks that would allow them to let banks fail. A downgrade often means that it becomes more costly for banks to raise money by selling debt, and that investors demand higher interest for riskier, which is what the downgrades represent.

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Moody's - Bank Ratings 2012
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