A dozen banks in the United Kingdom had their ratings slashed by Moody’s today. The banks downgraded included Lloyds TSB Bank and Royal Bank of Scotland.
RBS was downgraded by two notches from Aa3 to A2 and Lloyds TSB Bank by one notch to A1 from Aa3. Other banks on the chopping board were Santander UK, downgrade by one notch and Nationwide Building Society had a two-notch cut. Cooperative Bank and seven other smaller British building societies were also on the list.
The ratings agency said that it expected the British government would have to continue to support the more important financial institutions and probably let the smaller banks fail.
In its statement, it said “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,” it added.