Markets play down Moody’s threat to banks

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THE banking sector yesterday shrugged off the threat of a fresh downgrade to the credit ratings of 17 global institutions.

Moody’s said it was examining the ratings of Barclays, HSBC and Royal Bank of Scotland among others in a sign that the impact of the eurozone debt crisis is spreading throughout the global financial system.

The 17 big banks, which also include Deutsche Bank, Goldman Sachs and Morgan Stanley, are among more than 100 financial institutions to have their ratings placed under review by the agency.

Moody’s downgraded several European countries earlier this week and said the outlook for the UK’s gold-plated status had turned negative, which would have a knock-on effect on banks.

It said increased regulatory burdens, with banks being required to store more cash to protect them against future financial crises, had diminished their profitability and growth prospects.

Shares in Barclays closed up 3.25p at 244.9p, HSBC dipped 2.3p to 573.6p while Royal Bank of Scotland eased just 0.24p, a fall of less than 1 per cent, to 26.75p. Lloyds gained 0.46p at 34.38p.

Moody’s said: “While we had initially expected their standalone credit profiles to recover once the acute phase of the crisis had passed, we now view these challenges as structural features of global investment banks.”

The measures taken to shore up the banking system had helped but had not entirely eliminated the risks facing the sector, it added.