S&P pension pain for banks
Standard & Poor's, the credit rating agency, is preparing to deliver a blow to some of the UK's biggest banks and insurers, downgrading them because of the black holes in their pension schemes.
Last month, as part of a Europe-wide review of pension fund problems among manufacturing companies, the credit agency put five UK groups on credit watch – Rolls-Royce, BAE Systems, J Sainsbury, GKN and Pilkington. S&P is now turning its attention to the financial services sector.
At greatest risk from downgrades are Lloyds TSB, which has a £2.9bn pension fund deficit; HSBC, where the shortfall is £2.8bn; Barclays, with a £1.3bn black hole; and Royal & SunAlliance, which has a similar deficit.
Analysts at S&P are concerned that companies will have to divert funds to shore up their pension funds, so weakening their general financial position.
The UK financial services sector has been under pressure from the rating agencies for some time. Both Lloyds TSB and Royal & SunAlliance have been hit by worries about their life insurance funds and the need to put extra money into the businesses to cover falls in the stock market, which is near a seven-year low.
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies