May 24, 2011

Moody’s may cut UK banks’ credit ratings

by Jan Harris

Moody’s is reviewing the credit ratings of major UK banks in preparation for the withdrawal of the Bank of England’s special liquidity scheme next year.

The government established the £185bn emergency funding line for lenders during the credit crunch.

Moody’s believes that the withdrawal of this support could weaken the creditworthiness of some financial institutions, including Lloyds TSB, Royal Bank of Scotland and Santander UK, so it has placed their ratings on review.

It the banks’ ratings are downgraded their borrowing costs are likely to increase.

Eleven other banks and building societies have also been put under review by the agency.

The review is expected to take around three months to complete.

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