Today Moody’s has downgraded the credit ratings of 12 firms in the UK. Should we be worried?

Lloyds TSB, RBS, Nationwide, Co-Operative Bank and Santander UK were affected, whilst a number of building societies were also affected in this batch of re-rating; Newcastle, Norwich & Peterborough, Nottingham, Principality, Skipton, West Bromwich and Yorkshire.

HSBC, Barclays and Standard Chartered were unaffected by the downgrades, although nine Portuguese banks suffered downgrades.

Whilst downgrades in banks are becoming almost common occurrences, the names affected are significant. RBS have announced “disappointment” at the downgrade which they feel does not reflect the steps they have taken to address their problems.

The Building Societies Association have suggested a lack of surprise at the number of downgrades, stating that these were expected and don’t reflect a sudden drop in standards.

Moody’s themselves have ranked the downgrades in 3 levels based on how much support there is for the institution should they run into difficulty. Many of the building societies are regarded as having minimal support, whereas RBS and Lloyds have more support given the previous intervention from the UK Government.

The downgrades don’t tell us anything new about the state of UK banks or building societies, but the names involved does bring home the fact that no institution is safe and in the current climate, all institutions must prove they can survive without state intervention.

Ratings agencies don’t always get it right, but their assessments do have impact both in terms of the markets and investor confidence, so should we be worried? Well, the message is don’t panic if you bank with one of these names, but be mindful of how they may manage your money in the future.