Moody’s cuts British, Portuguese banks

The credit rating of two top UK banks were cut on Friday due to the likelihood of less state support in a future crisis, as Britain sought to reassure investors its banks were well capitalised and able to cope with a European debt crisis.

The credit rating of two top UK banks were cut on Friday due to the likelihood of less state support in a future crisis, as Britain sought to reassure investors its banks were well capitalised and able to cope with a European debt crisis.

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Ratings agency Moody's cut its rating on Royal Bank of Scotland by two notches, downgraded Lloyds by one notch, and cut its ratings on Santander UK, the Co-Operative Bank, Nationwide Building Society and seven other smaller British building societies.

Banks had been on review for possible downgrade as part of a trend where state support for lenders is being reduced, and reforms proposed last month by Britain's Independent Commission on Banking (ICB) had been expected to have a negative influence.

"The market's central expectation around the ICB impact had been for a 2-notch downgrade across the board, so it's better than expected," said Gareth Hunt, analyst at Investec.

Meanwhile, Moody's also downgraded nine Portuguese banks, citing their exposure to government debt and a weak economic growth outlook.

Moody's downgraded Portugal to Ba2, with outlook negative in July. Battling to emerge from recession, the country got €78 billion ($104 billion) bailout this year.