Big Three rally after eurozone crisis prompts ratings agency downgrade
BRITAIN’S banks rode out the latest blow to confidence in the sector yesterday, after 15 of the world’s biggest institutions were downgraded by ratings agency Moody’s.
Barclays, HSBC and Royal Bank of Scotland were among those targeted because of their exposure to the escalating eurozone crisis.
But banks, which had been bracing themselves for the downgrade since February, downplayed the impact, insisting the sector had taken action to ensure they were strong enough to withstand financial shocks.
The markets were not unduly worried. The downgrade was announced after the London Stock Exchange closed for the day on Thursday and there was an initial sharp fall in the banks’ share prices yesterday. But they quickly recovered.
There are, however, concerns the move by Moody’s will add to funding pressures for credit-hit banks, potentially making it harder for them to borrow money commercially.
RBS called the Moody’s downgrade a “backward-looking” change, which it said failed to recognise “substantial improvements” to the group’s balance sheet, funding and risk profile.It estimated the ratings change could mean it would have to find an extra £9 billion in collateral for its debts.
The British Bankers’ Association said UK banks had already carried out “wide-reaching reforms” and strengthened their balance sheets. A spokesman said: “They are well capitalised, so able to withstand future financial difficulties and have plans in place which will prevent taxpayers having to step in the future. Their exposure to problems in the eurozone is also very limited.”
Search for a job
Search for a car
Search for a house
Weather for Edinburgh
Wednesday 19 June 2013
Temperature: 9 C to 18 C
Wind Speed: 16 mph
Wind direction: West
Temperature: 12 C to 20 C
Wind Speed: 8 mph
Wind direction: North east