Royal Bank of Scotland protests downgrade

June 22, 2012 - 2:56 AM

LONDON (AP) — Royal Bank of Scotland, one of four big British banks to be downgraded by Moody's Investors Service, complained Friday that the rating is "backward-looking."

Part-nationalized RBS was downgraded Thursday along with HSBC, Barclays and Lloyds Banking Group as well as other banks like Goldman Sachs and UBS.

Shares in all four British bank fell in early trading in London. RBS was down 3 percent, Barclays dropped 2.3 percent, Lloyds was down 1.7 percent and HSBC was down 0.8 percent

Gary Greenwood, analyst at Shore Capital, said the downgrades had been anticipated for some time and were about what the market expected.

"As such, its impact should have already been partly priced in by funding and derivative counterparties," Greenwood said.

Although downgrades typically raise banks' funding costs, he said two new government programs to support banks would mitigate the impact.

RBS said the downgrade was "backward-looking and does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile." It said it believed the impact is manageable. Part-nationalized Lloyds also says the drop in its long-term rating would have little effect.

HSBC and Barclays did not immediately react to the rating changes announced late Thursday.

The British Bankers' Association said the four banks "are well-capitalized, so able to withstand future financial difficulties."

"UK banks have already made wide-reaching reforms to how they operate ahead of our international competitors," a spokesman for the British Bankers' Association said.

"Their exposure to problems in the eurozone is also very limited," the association said. "Moodys' assessment reflects overall concerns about the current ongoing issues in the eurozone rather than the organizations themselves."