Moody's puts 14 Banks on a review list

[MMM]

The 14 banks on review for potential donwgrade are:

Bank of Ireland UK PLC,

Co-Operative Bank PLC,

Coventry Building Society;

Lloyds TSB Bank PLC,

Nationwide Building Society,

Newcastle Building Society,

Norwich & Peterborough Building Society,

Nottingham Building Society,

Principality Building Society,

Royal Bank of Scotland PLC,

Santander UK PLC,

Skipton Building Society,

West Bromwich Building Society

Yorkshire Building Society.

Moody’s review covered 18 banks in all. Among other leading lenders, it said the debt rating for Barclays PLC, which did not take state funding, has been changed to negative from stable while HSBC Holding PLC’s was affirmed with a negative outlook.

[Sapphire Capital]

June 2, 2011

Moody's Investors Service said Thursday that it was reviewing the ratings of Bank of America Corp. Citigroup Inc. and Wells Fargo & Co. for possible downgrades.

The three banks' current ratings are already in the middle of the investment-grade corporate credit ratings. And that's with a boost from Moody's assumption the federal government would prevent them from failing in a crisis. Moody's said Thursday that this "too big to fail" assumption may no longer be true.

In a statement accompanying the announcement, Moody's senior vice-president Sean Jones said the Dodd-Frank Act makes clear the government "does not want to bail out even large, systemically important banking groups." One aim of the Dodd-Frank Act, which was signed into law last July, is to make it easier to break up large financial institutions.

Moody's currently rates Bank of America's senior debt A2, Citigroup's A3 and Wells Fargo's A1. But the implied government backing pushes those ratings up from where they would be otherwise.

But the banks may not lose all of that ratings cushion. Moody's said Citigroup and Bank of America's improving financial strength may temper the size of any cuts to their ratings.

A downgrade would likely raise the banks' borrowing costs.

In total, eight banks have higher ratings from Moody's on the assumption of government backing. The others are JPMorgan Chase & Co. Goldman Sachs Group Inc., Morgan Stanley and State Street Corp. Moody's said it continues to evaluate its assumption of federal backing for all of them.