Moody’s today downgraded its ratings for 12 British financial institutions, including Lloyds TSB Bank and Royal Bank of Scotland. The ratings agency said it thought Prime Minister David Cameron’s government was less likely to rescue the institutions in the event they collapsed.
“One of the reasons they’re doing this is that they think the British government is actually moving in the direction of trying to get away from guaranteeing all the largest banks in Britain, in other words trying to deal with the too-big-to-fail problem,” George Osborne, Chancellor of the Exchequer, told BBC Radio.
“In other words, people ask me, how are you going to avoid Britain and the British taxpayer bailing out the banks in the future? This government is taking steps to do that, and therefore credit ratings agencies and others will say, well actually, these banks have got show that they can pay their way in the world,” Osborne added.
S&P revises outlook for TD and RBC
Back on our side of the pond, Standard & Poor’s has revised its outlook on RBC and TD Bank to stable from positive on reduced expectations that future operating outperformance will provide sufficient grounds for an upgrade in the near-term.
S&P also affirmed its ratings on both banks and related entities, including its ‘AA-’ long-term and ‘A-1+’ short-term counterparty credit ratings.
“The stable outlook incorporates our expectations that TD Bank will exhibit stable ongoing operating performance, despite a possibly deteriorating economic environment,” said Standard & Poor’s credit analyst Thomas Connell.
“The stable outlook incorporates our expectations that RBC will maintain stable operating performance across a range of economic conditions, though lower growth prospects in Canada may weigh on short-to medium-term operating performance,” said Standard & Poor’s credit analyst Lidia Parfeniuk.