Moody's on Friday slashed the ratings of a dozen British banks, including RBS and Lloyds TSB, as well as of nine Portuguese lenders, amid uncertain financial conditions in Europe.
The ratings of the 12 British financial entities have been cut citing that possibilities of the UK government extending support to them, in case they are in choppy waters, are less.
Moody's cut its rating on Royal Bank of Scotland by two notches, and downgraded Lloyds by one notch.
However, Moody's Investors Service stressed that downgrade of British entities “do not reflect a deterioration in the financial strength of the banking system or that of the Government.”
The UK Finance Minister, Mr George Osborne, said Britain's banks remained well-capitalised and in better shape than many of their European rivals, who face bigger losses on holdings of peripheral euro zone debt.
The entities whose senior debt and deposit ratings are downgraded, include RBS, Lloyds TSB Bank and Santander UK.
“Moody's reassessment assumes a decrease in the probability that the UK Government would provide future support to financial institutions if needed,” the rating agency said in a statement.
The latest downgrade has sparked concerns about health of some UK banks and whether they would need some sort of bailout.
Portuguese banks
Separately, Moody's has cut the debt ratings of nine Portuguese banks — that includes Caixa Geral de Depositos and Banco BPI — on account of deterioration of their unsupported financial strength.
According to the agency, the increased asset risk of these banks is a direct consequence of their holdings of Portuguese government debt as well as the sovereign's (Portugal's) downgraded rating.
In a separate statement, the Moody's noted that the downgraded Portuguese banks are expected to see further deterioration of their domestic asset quality due to weak outlook for economic growth in the context of the Government's austerity measures.
In recent months, Europe has been grappling with acute debt turmoil whose epicentre is Greece. Further, there are rising fears about the financial health of Italy and Portugal.