Moody’s Investors Service on Tuesday said it placed the ratings of 14 of the 18 British financial institutions for a possible downgrade. This could lead to a hike in banks’ borrowing costs.
“The reassessment is not driven by either a deterioration in the financial strength of the banking system or that of the government. 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,” said Elisabeth Rudman, a Moody’s senior credit officer and bank analyst.
The latest decision follows Moody’s announcement on April 7 that it would reassess the levels of systemic support incorporated in the senior debt ratings of U.K. financial institutions. The review process will take around three months to complete.
During the review process, the agency will focus on the extent of support that should be incorporated into each institution’s ratings and any upward pressure on firms’ standalone ratings that could offset some of the downward pressure on the debt ratings.
The ratings of institutions placed on review for possible downgrade are Bank of Ireland; Co-Operative Bank; Coventry Building Society; Lloyds TSB Bank; Nationwide Building Society; Newcastle Building Society; Norwich & Peterborough Building Society; Nottingham Building Society; Principality Building Society; Royal Bank of Scotland; Santander UK; Skipton Building Society; West Bromwich Building Society and Yorkshire Building Society.
The ratings of Barclays Bank and HSBC Bank/ HSBC Holdings were not placed on review for possible downgrade.