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More European bank downgrades

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More European bank downgrades

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In what is being seen as a warning to European governments to better support the region’s weakened banks, the debt rating agencies have slashed their ratings on a number of lenders.

In Britain Moody’s cut Royal Bank of Scotland, Lloyds, Santander UK, the Co-Operative Bank, the Nationwide Building Society and seven other smaller British building societies.

It based that on the likelihood of less state support in a future crisis which analyst David Buik, BGC Partners said was nonsense: “Hell has a better chance of freezing over than the British government allowing Lloyds or RBS to go to wall. So this is ridiculous.”

Moody’s Investors Service also downgraded its ratings on nine Portuguese banks.

It said that was because of an increased risk they would not get back the money they’ve lent to the Portuguese government.

Portugal’s economic growth outlook is poor following tax hikes and spending cuts as part of an EU/IMF bailout.

At the same time Standard and Poor’s downgraded Dexia’s bank entities which is the process of being rescued — again — by the Belgian and French governments due to its very large exposure to the debts of the euro zone’s weakest country, Greece.

Rival Fitch placed Dexia’s bank entities on rating watch negative.