7 Oct 2011

Credit agency downgrades British financial firms

9:13 pm on 7 October 2011

Moody's has downgraded the credit rating of 12 British financial firms including Lloyds, RBS, Nationwide and Santander.

The international ratings agency says it now believes the British government is less likely to support some firms if they get into trouble, the BBC reports.

Moody's says, however, the downgrades do not "reflect a deterioration in the financial strength of the banking system".

The news sent bank shares lower on Friday.

The downgrades include a two-notch cut for government-controlled RBS, and a one-notch cut for Lloyds TSB, a division of part-nationalised Lloyds Banking Group.

Spanish bank Santander had its UK business downgraded by one notch, while Nationwide Building Society suffered a two-notch reduction.

Chancellor George Osborne told the BBC one reason for the downgrades was that the government was seen to be "trying to deal with the too-big-to-fail problem".

Mr Osborne said he was confident that British banks were well-capitalised.

"They are not experiencing the kinds of problems that some of the banks in the eurozone are experiencing at the moment."