Lenders Facing Credit Re-ratings
Sunday, April 5, 2009 17:28
Moody’s, the top credit rating agency is poised to re-rate the UK’s biggest banks and building societies. After Dunfermline Building Society’s dramatic collapse, some of the top ten mutuals could suffer the harshest re-ratings, which will threaten their survival as independent businesses.
Usually, societies with serious exposure to commercial property or toxic mortgage assets are the most vulnerable. So, the building societies are currently more vulnerable as they often forgo profits to give better savings and mortgage rates.
Various ratings agencies play a crucial role for banks and building societies in raising capital or borrowing from institutions like local authorities. A poor rating could sharply raise the cost of borrowing. However, the re-rating by the credit rating agency would possibly put the building societies at a disadvantage against the big banks.
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