Moody's rating agency has just reported:
Moody's Investors Service has today downgraded the senior debt and deposit ratings of 12 UK financial institutions and confirmed the ratings of 1 institution. This concludes its review of systemic support assumptions from the UK government for these institutions initiated on 24 May 2011.
The downgrades have been caused by Moody's reassessment of the support environment in the UK which has resulted in the removal of systemic support for 7 smaller institutions and the reduction of systemic support by one to three notches for 5 larger, more systemically important financial institutions. According to Moody's, announcements made, as well as actions already taken by UK authorities have significantly reduced the predictability of support over the medium to long-term. Moody's believes that the government is likely to continue to provide some level of support to systemically important financial institutions, which continue to incorporate up to three notches of uplift. However, it is more likely now to allow smaller institutions to fail if they become financially troubled. The downgrades do not reflect a deterioration in the financial strength of the banking system or that of the government.
The rating actions include a one-notch downgrade of Lloyds TSB Bank plc (to A1 from Aa3), Santander UK plc (to A1 from Aa3), Co-Operative Bank plc (to A3 from A2), a two-notch downgrade of RBS plc (to A2 from Aa3) and Nationwide Building Society (to A2 from Aa3); and downgrades of one to five notches of 7 smaller building societies. The ratings of Clydesdale Bank were confirmed at A2 (negative outlook). As outlined in the May press release, we have reviewed the standalone ratings of all entities prior to concluding on the debt ratings. A separate announcement today covers the upgrade of the standalone rating of Co-Operative Bank to C- (mapping to Baa1 on the long-term debt scale) from D+ and earlier announcements cover the upgrades of the standalone ratings of Santander UK, Nationwide, Yorkshire, and Principality Building Societies.
On the day when a bail out of RBS looks necessary, and no one doubts it will happen, there's a certain paradox in these comments and candidly I do not believe Moody's claims. The reality is that these banks are weak and the capacity to support them is uncertain. That's what's really behind this.
The rest, as some say, is BS.
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Moodys seem determined to destroy the European banking system. You have to ask yourself, why?
Exactly! Since when have ratings agencies ruled the world? RBS and Lloyds are in possibly the best position as far as European banks are concerned.
Moody’s thought the subprime crap was AAA. they should be sued for rating crap AAA. Starnge the UK banks have not sold off on this blockbuster news.
I think they were taken to court, but they explained that they only offer advice, buyer beware etc
I have had a previous post with Richard where I asked him who regulates the Credit Rating Agencies. His answer I believe (and correct me if I am wrong Richard) is that no-one regulates these agencies as they are a law unto themselves. If true (and I have no reason to doubt Richard on this)then this is the nutshell of the problem with the Credit Rating Agencies. As a previous comment has suggested ‘they only provide advice’, why do we take them so seriously ( I remmeber them giving tripple AAA ratings to Lehman Bros up until 24hrs before they went bust). If these Credit Ratings Agencies get their finance from the very Institutions (i.e. banks, financial corportations etc) who in effect bought us to the brink of Financial Meltdown why do so-called economists rate them as if they were the Sermon on the Mount.
Richard do you think it would be better if we had an Independent Internationally recognised Credit Rating Agencies who provided impartial advice and that could be seen to be trustworthy. Certainly it would stop the right wing loonies claiming that the UK was heading for a ‘Greek Style’ Debt crisis in 2010 when people like yourself, Paul Krugman, David Blanceflower (and my Cat!!!!) knew that although debt is a serious problem, our economy was purrfectly (my Cat speaking!!!) able to manage it.
Incidentally Richard, when is publishing date for ‘The Courageous State’ I am looking forward to a good read (currently reading ‘Treasure Islands’ by Nicholas Shaxson)