Moody's places RBS ratings on review for downgrade

AP News
Posted: Jul 05, 2013 3:46 PM

NEW YORK (AP) — Moody's Investors Service on Friday placed its ratings for Britain's taxpayer-owned Royal Bank of Scotland and its parent holding company on review for downgrade, after the nation's Treasury appointed an adviser to asses a potential split of the bank.

Britain's Treasury on Wednesday appointed the Rothschild investment bank to provide advice on a U.K. government review, which aims determine whether or not to transfer toxic assets at RBS into a separate entity known as a "bad bank." Some, including Bank of England former governor Mervyn King, have argued that the losses for the taxpayer might be lightened with such a split.

A decision is expected in autumn.

RBS is more than 80 percent owned by the British taxpayer after receiving a 45 billion-pound ($71 billion) bailout in 2008.

Moody's said its action reflects the further uncertainty for bond holders resulting from the government review. The government will consider a range of options for removing higher risk and/or impaired assets from RBS, the ratings agency said, and it believes that some of these options may entail losses for creditors.

Moody's expects to conclude its ratings review after the government issues its assessment.

RBS's "D+" standalone bank financial strength rating and its "A3" long-term debt and deposit ratings, the long-term ratings of the holding company, Royal Bank of Scotland Group plc, were all placed on review.

At the same time, Moody's placed the the standalone credit assessments and all other long-term ratings of National Westminster Bank (Natwest) plc and Royal Bank of Scotland NV were placed on review. These ratings are aligned with those of RBS because of a high degree of integration between RBS and these two entities.

In addition, Moody's is reviewing Ulster Bank Limited's and Ulster Bank Ireland Limited's long-term debt and deposit ratings and the ratings of the banks' subordinated debt instruments. The banks' short-term ratings were likewise placed on review. Moody's said the government's actions on RBS may impact RBS's ability and willingness to provide ongoing support for the Northern Ireland institutions.