Kamis, 21 Juni 2012

Britain's top lenders see credit rating cut as Moody's downgrades 15 of the world's biggest banks

Britain's top lenders see credit rating cut as Moody's downgrades 15 of the world's biggest banks

By James Salmon and This Is Money Reporter

PUBLISHED: 17:15 EST, 21 June 2012 | UPDATED: 17:18 EST, 21 June 2012

Credit ratings agency Moody's downgraded 15 of the world's biggest banks and financial institutions on Thursday evening, including Royal Bank of Scotland, HSBC, Barclays and Lloyds in the UK.

The move reflects Moody’s growing pessimism over the credit-worthiness of banks across the world as the eurozone crisis sweeps from Madrid to Edinburgh, London and New York.

In the US, Bank of America, Citigroup, Goldman Sachs and JP Morgan were among the US banks downgraded.

City of fright: Some of the UK's biggest lenders face a dressing down from ratings agency Moody's

City of fright: Some of the UK's biggest lenders face a dressing down from ratings agency Moody's

It came as two independent healthchecks on Spain’s crippled banks said that they would need up to 62billion euro (£50billion) in extra capital to weather a serious downturn of the economy and new losses on their books.

Gary Greenwood from analyst Shore Capital said: ‘Whatever the central banks seem to throw at the banking crisis only seems to calm things down for a bit before it pops its head up again.’

He added: ‘The UK banks are in a stronger position than their European counterparts â€" their liquidity and capital conditions are arguably better, but this proves that they cannot escape the problems in the eurozone.’

The latest downgrades, despite being long anticipated, will test the mettle of the Bank of England’s ‘shock and awe’ stimulus to keep the system afloat in the face of a eurozone meltdown while boosting lending for households and businesses.

On Wednesday, the Bank of England hosted its first monthly auction of cheap loans under its new £60billion a year Extended Collateral Term Repo scheme. The banks snapped up all £5billion on offer. But experts warned that the lower credit ratings could still spell bad news for small businesses as banks become more reluctant to lend.

Dr Pete Hahn from Cass Business School said: ‘As a result of the weaker ratings, market capacity is now likely to be further reduced due to collateralisation demands on banks. Businesses need to find alternatives.’

RBS, which is 82 per cent owned by taxpayers, has admitted it could be forced to raise at least £12.5billion in collateral to secure funds on the wholesale markets if it was downgraded by one notch.

In April it admitted that any reductions in its credit rating ‘could adversely affect the group’s access to liquidity and its competitive position, increase its funding costs and have a material adverse impact on the group’s earning, cash flow and financial condition’.

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I think personally that we should of traded more with the Commonwealth.

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BoE ECT will not reach the market, the £60bn will be grabbed by the banks over the coming months and the usual outcry will occur a few weeks later 'that the banks just aren't lending that further stimulus is required from the BoE'..

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