Lloyds, RBS Among U.K. Banks on Moody’s Downgrade Review

By Simon Clark
May 24 (Bloomberg) -- Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc are among 14 U.K. lenders whose debt Moody’s Investors Service is considering downgrading as withdrawal of government support may increase their credit risk.
Santander U.K. Plc and customer-owned lenders including Nationwide Building Society also had debt ratings put on review for a possible downgrade. The outlook on Barclays Plc’s senior debt and deposit ratings was changed to negative from stable, Moody’s said in a statement today.
British banks accepted about 1 trillion pounds ($1.6
trillion) in government bailouts and guarantees following the
2008 financial crisis, support that Moody’s said accounts for two to five credit grades for larger U.K. lenders and one to five levels for smaller lenders. The review comes as stocks slump globally amid concern Europe’s debt crisis is worsening and the global economic recovery is waning.
The reassessment was initiated in response to guidance from U.K. authorities “that banks that fail in the future should not expect capital injections from the public purse,” Elisabeth Rudman, a senior credit officer at Moody’s, said in the statement. It “is not driven by either a deterioration in the financial strength of the banking system or that of the government.”
The other banks to have debt ratings put on review for a possible downgrade were the U.K. unit of Bank of Ireland Plc, Co-Operative Bank plc, Coventry Building Society, Newcastle Building Society, Norwich & Peterborough Building Society, Nottingham Building Society, Principality Building Society, Skipton Building Society, West Bromwich Building Society and Yorkshire Building Society.

Government Support

The Aa2 senior debt rating of HSBC Holdings Plc was affirmed with a negative outlook.
The five-member FTSE 350 Banks index gained 0.3 percent at
8:22 a.m. in London.
Politicians and business groups have criticized British lenders for failing to boost credit and fuel the nation’s economy even after receiving government support.
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, Barclays, HSBC, RBS and Santander 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.