Moodys downgrades 12 British Financial Institutions

pqrdef

Nationalisation was probably the only answer all along, though still not a complete answer.

The world is full of huge risks, including natural disasters and political risks. The tsunami was bad enough, but would have been a lot worse if the nuclear plant had blown. Political catastrophes can happen wherever there are politicians.

The modern world economy is so deeply and widely exposed to these risks that it has to find ways of insuring them. This means bigger and wider institutions. We needed something the size of NATO to face the Cold War risk, but politicians were scared enough to put that together and pay for it. We probably need a lender of last resort backed by the whole G20 to restore confidence in the banking system.

Meanwhile, if the government doesn't want to bail out the banks it has to get out and look for support from elsewhere. Not talk about cutting the banks loose.

Thrugelmir

Graham_Devon wrote: »

Basically RBS has the right, under the terms of the government bailout, to sell further shares to the government, at 50p per share. Nearly double the shares value. Obviously this would be bad news for us taxpayers.

and the alternative? Let RBS collapse. Think of the consequences then.

tomterm8

Graham_Devon wrote: »

At that point, the management team could be removed...... and knighted.

I hope they are forced to bow down while the queen puts a sword to their neck, but I am not sure about the knighting bit.

Thrugelmir wrote: »

and the alternative? Let RBS collapse. Think of the consequences then.

What happens if we nationalize the RBS, and it collapses anyway?

RBS, Barclays and Lloyds altogether are just too large for the British economy. If they go, there is nothing the British government will be able to do about it.

Thrugelmir

tomterm8 wrote: »

Lloyds altogether are just too large for the British economy. If they go, there is nothing the British government will be able to do about it.

and the impact on the UK's beloved property obsession? If Lloyds went under.

tomterm8

Thrugelmir wrote: »

and the impact on the UK's beloved property obsession? If Lloyds went under.

Is irrelevant. I didn't say that I the UK shouldn't support Lloyds, RBS, and Barclays, I said there was no practical way for them to do so.

Butterfly_Brain

As I read it the downgrades have been split into 3 categories

Banks with a "high likelihood of support" are RBS and Lloyds.
So these are the worst performing banks surprise surprise!

Banks or building societies with a "moderate or high likelihood of support" are Nationwide, Santander UK, Co-operative Bank, and Clydesdale Bank. Clydesdale's rating was reaffirmed, not cut.
So these are banks that are borderline

Institutions with a "low or no likelihood of support" included the following building societies: the Newcastle, Norwich & Peterborough, Nottingham, Principality, Skipton, West Bromwich and Yorkshire.

So as I see it the ones to be really worried about are RBS and Lloyds, closely followed by Nationwide, Santander, Co-op bank and Clydesdale bank.

Moody’s has not implemented these cuts because it believes there’s been a market deterioration in the financial strength of the banking system or the UK government, but rather because it believes the government has re-evaluated its role in supporting banking institutions

Financial Times

DervProf

Must be all that "mortgage rationing".

Perhaps Moody's would upgrade our banks' ratings if they were lending more.

ruggedtoast

Its ok, we're all in this together.

Some of us are more in it than others though.

pqrdef

Butterfly_Brain wrote: »

Banks with a "high likelihood of support" are RBS and Lloyds.
So these are the worst performing banks surprise surprise!

i don't think it's about the likelihood of needing support, it's about the likelihood of getting it.

Norwich & Peterborough certainly needs support, but that's why it ceases to exist on November 1st. No taxpayer contribution needed though. Some of the other building societies listed are also small enough to be rescued without Treasury involvement, so why they need downgrading is a puzzle.

They've missed out Coventry and Leeds, both of which are big enough to be problematic.

michaels

Don't understand this - surely those most likely to receive govt support are the safest?

What is the relationship between Santander UK and the rest of the Santander group - do they have separate ratings.


Putting my Hamish hat on for a moment - if house prices fall the banks are insolvent and the UK govt can not afford to bail them out - I don't see the UK govt dong anything other than (try) to support the housing market in the short term.

Butterfly_Brain wrote: »

As I read it the downgrades have been split into 3 categories

Banks with a "high likelihood of support" are RBS and Lloyds.
So these are the worst performing banks surprise surprise!

Banks or building societies with a "moderate or high likelihood of support" are Nationwide, Santander UK, Co-operative Bank, and Clydesdale Bank. Clydesdale's rating was reaffirmed, not cut.
So these are banks that are borderline

Institutions with a "low or no likelihood of support" included the following building societies: the Newcastle, Norwich & Peterborough, Nottingham, Principality, Skipton, West Bromwich and Yorkshire.

So as I see it the ones to be really worried about are RBS and Lloyds, closely followed by Nationwide, Santander, Co-op bank and Clydesdale bank.

Moody’s has not implemented these cuts because it believes there’s been a market deterioration in the financial strength of the banking system or the UK government, but rather because it believes the government has re-evaluated its role in supporting banking institutions

Financial Times