Credit rating agencies turn up heat on Barclays

Tim Wallace
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MAJOR global banks face taking a hit from tighter regulation as a result of the Libor scandal, ratings agency Fitch warned yesterday, as well as reputation damage if any follow Barclays into the firing line.

The grim announcement came after Moody’s and Standard and Poor’s both put Barclays’ rating on negative outlook thanks to the reputation damage caused by the bank’s Libor manipulation, the record £290m fine levied by the Financial Services Authority (FSA), and the turmoil at the top of the bank as the chairman, chief executive and chief operating officer have all handed in their resignations.

In particular, there is concern over the future of Barclays’ powerful investment banking arm.

Moody’s fear “the shareholder and political pressures on Barclays could lead to broader pressure on the bank to shift its business model away from investment banking” – previously a major driver of profits in the group.

S&P said it was concerned about poor business practices and “near-term strategic uncertainty caused by the change in management.”