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While today’s decision by the Bank of England MPC was literally a no brainer it does not help the thousands of home owners who are struggling to make ends meet. As we read another report from the...
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Saturday 31st May 2008
Just when the banking sector thought that the situation could not get markedly worse, it seems that the cost of credit may well increase a notch or two for many in the UK Banking sector. Moody’s, the leading credit agency, has highlighted the short to medium term risk to the UK Banking sector, citing a weakening economy and restrictions on lending to customers. They believe that this will see profits reduced over the next couple of years and more pressure placed on balance sheets.
While Moody’s believe that the UK Banking sector is fundamentally strong, some of the weaker financial companies in the sector will suffer if their credit rating is reduced. This is the key factor which lenders will use to assess the credit worthiness of a company and it directly affects the cost of finance – the higher the perceived risk, the higher the rate of interest payable.
Even though there is no sign of any immediate reduction in credit ratings, the fact that the sector is affectively under review is not a good sign. Ongoing fund raisings by the likes of Royal Bank of Scotland and Bradford and Bingley are under pressure and these developments do not help the cause. |
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