James Moore: Moody’s gets into the holiday spirit with downgrade


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The Independent Online

Outlook Talking about being late to parties, credit ratings agencies have made an art form of it. The don’t usually arrive until after everyone has gone home and the cleaners have started to make an attack on the mess.

Given this, it’s hardly a surprise that Moody’s has only now woken up to the fact that UK banks have huge, unquantified liabilities sitting on their books as a result of regulatory investigations into past misconduct. As such, it has downgraded its outlook for the sector to “negative”.

Moody’s feels that the imposition of requirements such as a “ring-fence” around retail banking assets will reduce the likelihood of future bailouts.

Regulators and politicians will like the sound of that because that’s the aim of the fence. It is, of course, hogwash.

If a big bank trips up again it is highly unlikely that anyone will risk Lehman Brothers redux. The taxpayers’ chequebook will be out quicker than you can say “never again”. 

But if Moody’s wants to cheer everyone up by saying it’s less likely, well, where’s the harm?