Moody’s Investors Service has downgraded 12 UK financial institutions in the on reduced expectations for government support if financial firms run into trouble.
The rating agency said Friday the downgrades have been caused by its reassessment of the support environment in the UK, which has resulted in the removal of systemic support for seven smaller institutions, and the reduction of systemic support by one to three notches for five larger, more systemically important financial institutions.
According to Moody’s, announcements, and actions already taken, by UK authorities “have significantly reduced the predictability of support over the medium to long-term.”
Moody’s says it believes that the government is likely to continue to provide some level of support to systemically important financial institutions, which continue to incorporate up to three notches of uplift. However, it is more likely now to allow smaller institutions to fail if they become financially troubled, it says.
The downgrades do not reflect a deterioration in the financial strength of the banking system or that of the government, it stresses.
The rating actions include a one-notch downgrade of Lloyds TSB Bank plc, Santander UK plc, Co-Operative Bank plc; a two-notch downgrade of RBS plc and Nationwide Building Society; and downgrades of one to five notches of seven smaller building societies.