Banks may face big credit rating cuts

London: British banks may face “very notable” credit rating cuts once newly written “living wills” herald the end of government support for the system, according to Moody’s Investors Service.

Plans to introduce living wills, whereby banks are forced to simplify the corporate structure to allow an orderly break-up should they get into difficulty, would remove the necessity for government support, said Moody’s in a report.

“Given that most ratings in the UK currently incorporate a very high degree of extraordinary support, the phasing out of this support could result in very notable rating down-grades unless banks have substantially strengthened their intrinsic credit profile by then,” said Moody’s.