Moody’s to Place U.K. Banks on Review for Downgrade, Sky Says
May 24, 2011, 1:02 AM EDTBy Jacob Greber and Sarah McDonald
May 24 (Bloomberg) -- Moody’s Investors Service is likely to say it will consider downgrading debt for 14 of the 18 British banks and building societies it covers as withdrawal of government support may increase credit risk, Sky News said.
More than one of the U.K.’s four biggest banks will be among the lenders to be put on review today, Sky reported in a blog on its website, citing people close to the ratings company.
British banks accepted about 1 trillion pounds ($1.6 trillion) in government bailouts and guarantees following the 2008 financial crisis, support that Moody’s will say accounts for between two and five credit grades for larger U.K. lenders and one to five notches for smaller firms, Sky said. The review comes as stocks slump globally amid concern Europe’s debt crisis is worsening and the global economic recovery is waning.
Tim Osborne, a Sydney-based spokesman for Moody’s, declined to comment when contacted by telephone by Bloomberg News.
New York-based Moody’s cut Australia’s four largest banks by one level to Aa2 last week, citing their reliance on wholesale debt markets.
Moody’s may say its review of the U.K. lenders will take about three months to gauge the level of state support that should be incorporated into the credit rating of each bank, Sky said. That’s the same time it took on the Australian assessment.
Politicians and business groups have criticized British lenders for failing to boost credit and fuel the nation’s economy even after receiving government support.
Lawmaker Criticism
A cross-party panel of British lawmakers said April 20 that it is “inappropriate” for banks to award staff large bonuses and reap excessive profits while they rely on support from taxpayers. The House of Commons Public Accounts Committee said British banks benefit from an “implicit expectation” that taxpayers will rescue them.
Lloyds Banking Group Plc, Barclays Plc, HSBC Holdings Plc, Royal Bank of Scotland Group Plc and Santander U.K. Plc agreed in February to make credit available to businesses and foster demand for loans to aid economic recovery. RBS and Lloyds are Britain’s biggest taxpayer-aided banks.
Moody’s will say that the review of the creditworthiness of British banks wasn’t triggered by any specific deterioration in the banking system or of the government, Sky said.
--Editors: Russell Ward, James Gunsalus
To contact the reporters on this story: Jacob Greber in Sydney at jgreber@bloomberg.net; Sarah McDonald in Sydney at smcdonald23@bloomberg.net
To contact the editors responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net; Ben Livesey at blivesey@bloomberg.net
