Moody's Threatens Ratings Cuts to Small U.K. Banks

Saying that the authorities in the U.K. have already made it clear that they will not always be there to rescue the smaller banks, Moody's said in a statement, "The reassessment is not driven by either a deterioration in the financial strength of the banking system or that of the government."

Banks that might be subject to downgrade are mostly those smaller ones, according to the company, and include among their number building societies. Moody's said that they had benefited from as many as five notches added to their senior debt ratings, thanks to implied support from the U.K.'s banking system, but were unlikely to be deemed systemic in the medium term and thus less likely to be ensured of such support should the need arise.

The company is continuing, as it had begun in March, to review implicit government support that had been factored into banks' ratings; it is performing such a task on a country-by-country basis for smaller financial institutions throughout Europe and making adjustments accordingly.