RBS and Lloyds among dozen cut by Moody's

Moody's blamed Government unwillingness to support failing banks for its downgrade of Royal Bank of Scotland, Lloyds Banking Group and 10 other British financial institutions.

The ratings agency said yesterday that its downgrades of senior debt and deposit ratings, which also included Nationwide and Santander UK, reflected an increased risk that the holders of bank bonds would share the pain if a lender got in trouble in future.

The cuts came as RBS vehemently denied that it might need a fresh bailout amid fears about banks' potential losses from the eurozone debt crisis. RBS said it had passed earlier tests of financial resilience easily and that it was one of Europe's best capitalised banks.

Moody's said the actions taken by the UK and statements about getting taxpayers off the hook for failures had reduced the predictability for bondholders. The agency's downgrades followed recommendations from Sir John Vickers' banking commission, which included a separation of retail and investment banking and for senior bondholders to suffer losses ahead of taxpayers.

Elisabeth Rudman, an analyst at Moody's, said: "There is a gradual move towards trying to ensure that taxpayers don't put in the money to support banks in future and that bondholders are somewhat more likely to share the pain if there were to be a problem."

Moody's stressed that its decision did not reflect weaker finances either for the banks or the Government.

RBS said it was disappointed that Moody's had not acknowledged its improved standalone credit profile. Lloyds said Moody's decision would have minimal impact on funding costs.

However, amid widespread jitters about banks' financial strength, RBS shares dropped 3 per cent and Lloyds declined 3.4 per cent, making them the biggest fallers in the FTSE 100 index.

Barclays and HSBC, which did not receive direct cash injections from the Government, escaped downgrades because they were already assumed to have less Government support. The Chancellor, George Osborne, defended the Government against the downgrades of RBS and Lloyds, which are 41 per cent and 83 per cent state-owned. He said the downgrades showed that the Vickers commission and other reforms were freeing taxpayers from the need to rescue failing banks.

Mr Osborne said: ""People ask me, 'How are you going to avoid Britain and the British taxpayer bailing out banks in the future?' This government is taking steps to do that. And, therefore, credit-rating agencies and others will say these banks have got to show they can pay their way in the world."

The Chancellor also argued that the banks were financially strong after speculation that RBS might need more capital on top of the £45bn pumped in by the Government. He said: "I'm confident that British banks are well capitalised, they are liquid [and] they are not experiencing the kind of problems that some of the banks in the eurozone are experiencing at the moment."

RBS took the unusual step of issuing a statement rebutting reports that it could need more capital. Some analysts estimate that Europe's banks may need hundreds of billions of pounds in new capital to cope with the eurozone debt crisis. The European Banking Authority is also working on new stress tests after RBS passed the previous round in July, but not by much.

RBS said the original tests were flawed and took no account of its successful efforts to offload assets from its balance sheet and that trading losses were assessed based on the bank's extraordinary write-offs in 2008.

On exposure to the eurozone, RBS said: "Our peripheral sovereign exposures outside of Greece, which we have already written down to 50 per cent, are circa £1bn, which are modest relative to core tier-one capital of [about] £50bn. Any haircut on a new test by the EBA would therefore not change our result materially."

Lord Oakeshott, a close ally of the Business Secretary, Vince Cable, called for RBS to be fully nationalised. He said: "RBS is starving viable small businesses of the credit they need to grow. They can't wait for the Treasury to dream up fancy new financial structures – they just want the Treasury to pull the stuck lending levers now."

News
scienceExcitement from alien hunters at 'evidence' of extraterrestrial life
Life and Style
Customers can get their caffeine fix on the move
food + drink
News
newsRyan Crighton goes in search of the capo dei capi
Arts and Entertainment
Actors front row from left, Jared Leto, Jennifer Lawrence, Meryl Streep, Ellen DeGeneres, Bradley Cooper, Peter Nyongío Jr., and, second row, from left, Channing Tatum, Julia Roberts, Kevin Spacey, Brad Pitt, Lupita Nyongío and Angelina Jolie as they pose for a
film
PROMOTED VIDEO
Sport
sport
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Horst P Horst mid-fashion shoot in New York, 1949
fashionFar-reaching retrospective to celebrate Horst P Horst's six decades of creativity
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Life and Style
news

As Voltaire once said, “Ice cream is exquisite. What a pity it isn’t illegal”

Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Service Desk Analyst- Desktop Support, Helpdesk, ITIL

£20000 - £27000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

Service Desk Analyst - (Active Directory, Support, London)

£25000 - £35000 per annum: Harrington Starr: Service Desk Analyst - (Active Di...

Junior Quant Analyst - C++, Boost, Data Mining

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

Junior Quant Analyst (Machine Learning, SQL, VBA)

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

Day In a Page

All this talk of an ‘apocalyptic’ threat is simply childish

Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
Mafia Dons: is the Camorra in control of the Granite City?

Mafia Dons: is the Camorra in control of the Granite City?

So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Once the poor relation, the awards show now has the top stars and boasts the best drama
What happens to African migrants once they land in Italy during the summer?

What happens to migrants once they land in Italy?

Memphis Barker follows their trail through southern Europe
French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

Frank Mugisha: 'Coming out was a gradual process '

Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

Radio 1’s new top ten

The ‘vloggers’ signed up to find twentysomething audience
David Abraham: Big ideas for the small screen

David Abraham: Big ideas for the small screen

A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

Florence Knight's perfect picnic

Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

Horst P Horst comes to the V&A

The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

Mark Hix's summery soups

Soup isn’t just about comforting broths and steaming hot bowls...
Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

Tim Sherwood column

I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
Eden Hazard: Young, gifted... not yet perfect

Eden Hazard: Young, gifted... not yet perfect

Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
Tim Howard: I’m an old dog. I don’t get too excited

Tim Howard: I’m an old dog. I don’t get too excited

The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

Tom Peck on Match of the Day at 50

The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition