18 British banks face debt rating blow

City A.M. Reporter
Up to 18 British banks could see their senior debt ratings cut several notches by Moody's over coming months as the rating agency assesses how they would fare without implicit government support.

The banks more immediately vulnerable to a downgrade are smaller institutions, including many building societies, rather than larger banks still heavily supported by the state, Moody's said.

It said it was reviewing systemic support assumptions incorporated into the senior debt ratings of these banks as they were unlikely to be deemed systemic in the medium term, and would instead be judged as standalone credits.

British banks benefited from up to five notches of uplift to their senior debt ratings during the crisis from implicit systemic support, Moody's said.

The bigger ones, including those bailed out in the financial crisis such as Lloyds and Royal Bank of Scotland, will also be scrutinised in the second half of 2011, and may until then be subject to negative outlooks, Moody's said.