British banks downgraded amid reports of shaky RBS finances

Oct 7, 2011, 8:09 GMT

London - A leading rating agency Friday downgraded the credit rating of 12 banks and financial institutions in Britain, including partially state-owned Royal Bank of Scotland (RBS) and Lloyds.

Moody's rating agency said it now believed the British government was 'less likely' to support some firms if they got into trouble.

However, it emphasised that the downgrades did not 'reflect a deterioration in the financial strength of the banking system.'

Other banks and firms included Santander and Nationwide.

The move triggered a fall in leading banking shares on the London Stock Exchange of more than 3 per cent.

A report in the Financial Times Friday said that RBS, the bank at the centre of the 2008 crisis, could require additional recapitalization.

'Moody's Investors Service has today downgraded the senior debt and deposit ratings of 12 UK financial institutions and confirmed the ratings of one institution,' said a statement.

The downgrades include a two-notch cut for government-controlled RBS, and a one-notch cut for Lloyds TSB, a division of part-nationalized Lloyds Banking Group.

Spanish bank Santander had its British business downgraded by one notch, while Nationwide Building Society suffered a two-notch reduction.

The move was seen as a 'technical step' rather than an indication that Moody's believed British banks were likely to fail, analysts said.