UK BANKS SLAPPED WITH CREDIT DOWNGRADES TO JUNK STATUS

UK BANKS SLAPPED WITH CREDIT DOWNGRADES TO JUNK STATUS

Friday June 22, 2012 + SKYE NEWS

Home owners and businesses face the prospect of higher interest rates after Britain's biggest banks had their status downgraded.

The credit ratings agency Moody's has slashed its assessments of 15 major world banks - among them RBS, Barclays and Lloyds in the UK and JPMorgan, Goldman Sachs and Citigroup in the US. The downward move, which the agency announced it was considering in February, reflects fears that the banks' growth and profit prospects are declining. :: Q&A - How Banking Downgrades Affect UK Among the others downgraded are, Bank of America, Societe Generale, Credit Agricole and Deutsche Bank. The downgrades range in scope from one notch to two notches depending on the particular institution. Barclays has been given a two-notch downgrade, while HSBC, RBS and Lloyds were downgraded by one notch. Sky's City editor Mark Kleinman earlier exclusively revealed that the announcement. He said: "This is going to have some impact on the funding costs of these banks.

"I think there'll be some relief in the City that the downgrades weren't more severe because it's certainly possible that Moody's could have gone further." Banks have been under scrutiny amid the pressure facing the industry from the effects of the global financial crisis. Kleinman said the move is part of the agency's wider reassessment of the health of banks. The major ratings agencies have rushed to downgrade banks across the Continent in recent months, particularly as the eurozone's problems have intensified. A cut last month to the credit rating of Santander UK, the Spanish-owned lender, triggered speculation about the safety of customers' savings which was quickly dismissed by the bank. The latest wave of downgrades will bring many of the other UK banks in line with Santander UK and there will be no resulting impact on the security of their savings. On Thursday bank shares lost value in late trading on the FTSE 100, with RBS the biggest faller of the main UK banks.