[letmein]

Twelve UK financial institutions have been downgraded by a leading credit ratings agency, on the back of reduced Government support.

Moody's cut its rating on state-owned banks RBS by two notches and Lloyds TSB by one notch, taking both to Aa3.

Other institutions to be downgraded included the UK arm of Spain's Santander, Co-operative Bank, building society Nationwide and several smaller UK banks.

Sky's City editor Mark Kleinman had revealed in May that Moody's would be putting 14 British banks and building societies on review for a downgrade.

n a statement, the ratings agency said the downgrades were caused by a reduction in confidence after the Government withdrew its backing for seven smaller institutions and scaled back its support for the five "larger, more systemically important financial institutions".

It added that medium- to long-term support was unpredictable but that it expects the Government to continue to support the bigger banks which are more systemically linked.

"However, it is more likely now to allow smaller institutions to fail if they become financially troubled," it warned.

Although it recognised that the stand-alone financial strength of the five institutions had improved, it did not offset the reduction in the Government's safety net.

Shares in the banks slumped as markets opened this morning, with any initial gains expected in the FTSE quickly wiped out.

RBS shares fell 5% when markets opened but recovered as the day wore on.

The bank said it was disappointed that Moody's had not "acknowledged the progress we have made in strengthening the bank's credit profile".

"We do, however, see the removal of implicit Government support for the UK banking sector as being a necessary and important step forward as the sector returns to standalone strength," it added.

Moody's said that the downgrades do not reflect a deterioration in the financial strength of the banking system or that of the UK Government.

Commenting on the news, Chancellor George Osborne said: "As I understand it, one of the reasons they are doing this, is because they think the British Government is actually moving in the direction of trying to get away from guaranteeing all the largest banks in Britain.

"I'm confident that British banks are well capitalised, they are liquid, they are not experiencing the kinds of problems that some of the banks in the Eurozone are experiencing at the moment."

The regional building societies affected by the ratings review were Newcastle, Norwich & Peterborough, Nottingham, Principality, Skipton, West Bromwich and Yorkshire.

The ratings agency also downgraded nine Portuguese banks.

http://news.sky.com/home/business/article/16084498


Sir Mervyn King has insisted that the Bank of England's surprise move to pump £75 billion into the UK economy is the right thing to do as the country faces "the most serious financial crisis" ever seen.

The Bank's governor was speaking after the Monetary Policy Committee (MPC) voted to boost its quantitative easing (QE) programme - effectively printing more cash - from £200 billion to £275 billion and hold interest rates at 0.5%.

The move, dubbed QE2, is the first change to QE since November 2009 and is the clearest signal yet that the Bank thinks Britain is on the brink of a double-dip recession.

Explaining the committee's reasoning, Sir Mervyn said: "This is the most serious financial crisis we've seen at least since the 1930s, if not ever.

"We're having to deal with very unusual circumstances and to act calmly and do the right thing. The right thing at present is to create some more money to inject into the economy."

Business leaders also welcomed the announcement after figures revealed Britain suffered a deeper recession and is recovering more slowly than first thought.

However, the decision raised fears over the impact on pension funds and some groups warned a surge in the already-high rate of inflation would erode savings.

The value of the pound sank against most major currencies following the announcement, while the FTSE 100 Index closed more than 3% higher, boosted in part by the Bank's decision.

Alan Clarke, UK economist at Scotia Capital, said: "Once again the BoE has made use of its secret weapon - shock and awe. Pretty much everyone expected QE to restart at some point - but it was only a minority view that it would start this soon, or in excess of £50 billion."

The MPC said its members made the decision to boost QE over the next four months because the slack in the UK economy will likely be "greater and more persistent than previously expected". A report by the Bank into the effect of QE on the economy previously found the stimulus measure provided a "significant" benefit to growth.

http://www.huffingtonpost.co.uk/2011..._n_998588.html

[arista]

"Moody's cut its rating on state-owned banks RBS
by two notches and Lloyds TSB by one notch, taking both to Aa3."


Sure
but they ain't Closing.


Sign Of The Times.