Ratings Agency downgrades UK banks

Britain’s beleaguered banks and building societies were dealt another blow today after a debt agency said the decreased likelihood of Government backing made them less credit-worthy.

Lloyds Banking Group, Santander UK, Royal Bank of Scotland, Co-operative Bank, Nationwide and seven smaller building societies saw their credit ratings slashed by Moody’s Investor Service.

The move – which triggered a fall in banking shares on the London Stock Exchange – means the cost of borrowing for the affected financial institutions is likely to increase.

RBS, which saw its shares drop more than 3%, also came under pressure after a report in the Financial Times suggested it could require a further bailout from the Government.

The bank said it was “disappointed” that Moody’s had not acknowledged its progress in strengthening its finances since 2008.

Moody’s stressed its review did not reflect a deterioration in the financial strength of the banking system or the Government.