Banks at risk, agency warns warns on
Friday 17 March 1995
The banks and building societies are on a list produced by rating agency IBCA of institutions that could be allowed to fail in the event of potential collapse. The list is used by many local authorities to screen where they should deposit their funds.
One firm of investment advisers, Integer, has already advised 150 local authority clients that investments and deposits should not be made with banks and building societies to which IBCA gave a ``legal'' rating of four or worse in January.
Along with its basic credit ratings, IBCA rates institutions on a scale of one to five, based on its judgement of whether or not they would be rescued by state authorities or their shareholders if they collapsed.
In January it correctly ranked Barings, despite its blue-chip credit rating (A1), as an institution which faced the possibility of not being saved. Others which had had a poor legal rating included Johnson Matthey, which was saved by the Bank of England out of its own funds, and Banco Ambrosiano, which was not rescued.
Banks with a rating of between one and three would be supported, says IBCA, because they are too important to the banking system to fail, or because their shareholders would come to the rescue. A rating of four means there might be support but it cannot be taken for granted.
Robin Monro-Davis, managing director of IBCA, said: ``It is not a merit rating or judgement about management, but an opinion about the bank's position in the financial system and the attitude of the authorities.''
He said the merchant banks would all have scored higher ratings 10 years ago, but the Bank of England had swung firmly towards a free-market approach to bank rescues. The Bank's formal position is that it does not guarantee any bank.
IBCA gives a four rating to banks such as Hambros, Robert Fleming, Kleinwort Benson, Schroder Wagg, Singer & Friedlander and Standard Chartered - names which, like Barings prior to its collapse, would not have been thought of by the public as risky places to invest.
Most of Britain's building societies get a four rating because the Treasury might bail out one that failed, but this cannot be assumed. Only the two biggest, Halifax and Nationwide, are given a rating (two) that implies they could be certain of rescue.
Peter Morley of Integer said: "Two hundred banks internationally get a three rating or better. So why invest with banks like Barings when you have a substantial number of banks you can invest safely with?"
Bank Credit Indiv. Legal
rating rating rating
Abbey National A1+ A/B 2
Bank of Scotland A1+ B 2
Barclays A1+ B 1
Baring Brothers A1 B/C 4
Charterhouse A1 B 3
Close Bothers A2 B 4
The Cooperative Bank A2 B/C 4
Robert Fleming & Co A1 A/B 4
Hambros Bank Ltd. A1 B 4
Kleinwort Benson Ltd A1 B/C 4
Lazard Brothers & Co A1 B 3
Lloyds Bank A1+ A/B 2
Midland Bank A1+ B 2
Morgan Grenfell & Co Ltd A1+ B 3
National Westminster Bank A1+ B 1
NM Rothschild & Sons A1 B 4
The Royal Bank of Scotland A1+ B 2
Schroder Wagg & Co A1 B 4
Singer & Friedlander A2 B/C 4
Standard Chartered A1 B 4
TSB Bank A1+ B 2
SG Warburg & Co A1+ A/B 3
An A1 credit rating means the institution is regarded as having the highest capacity for timely repayment. A2 implies a good capacity. The individual rating assesses the institution's ability to support itself financially - A is strong, C adequate.
- 2 Porn block in India: hundreds of sexual websites banned, internet outraged
- 4 Dutch King Willem-Alexander declares the end of the welfare state
- 5 Gamers confess the worst things they've done in The Sims
Jackie Chan in second place in Forbes' Highest Paid Actors list after magazine includes actors working outside US movie industry
Malaysia issues arrest warrant for Gordon Brown’s sister-in-law after she publishes stories on leader Najib Razak's financial affairs
Natalia Molchanova: World's most successful free-diver missing and feared dead after disappearing in Mediterranean
Dutch King Willem-Alexander declares the end of the welfare state
Pizza Express protests: these restaurants charge staff for tips paid by card
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
Chris Leslie: Jeremy Corbyn's anti-austerity agenda will harm the poor, says Labour shadow Chancellor
Jeremy Corbyn: Tony Blair could face war crimes trial over 'illegal Iraq invasion'
Landlords renting properties to illegal immigrants to face up to five years in prison
While we fixate on Calais, the Home Office is quietly deporting dozens of migrants on 'ghost flights'
iJobs Money & Business
£35 - 38k + Benefits & Bonus: Guru Careers: We are seeking an Account Manager ...
£20000 - £25000 per annum + OTE £45K: SThree: At SThree, we like to be differe...
£50 - 80k: Guru Careers: We are seeking an Associate Director for the Markets ...
£60 - 100k: Guru Careers: Our client is looking for an Associate Director of S...