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Credit ratings agencies still considering moves on Lloyds and HBOS

Despite the £17 billion cash injection agreed with the UK government is seems as though we may see some short term pressure on the credit ratings of both Lloyds Bank and HBOS. While Moody's Ratings agency has come out and confirmed no change in the ratings at present the two groups are actually on credit watch with a view to a possible downgrade.

While any downgrade will increase the cost of credit for the groups, which are shortly to merge, any fall will not be as pronounced as they have already strengthened their balance sheets with capital supplied by the UK government. However, it does show the seriousness with which the current economic crisis is being viewed by the credit ratings agencies, which play a vital role in the cost of finance for the world of business.

Lloyds Bank and HBOS will not be the last of the major UK banks to come under the microscope with the ratings agencies but there are hopes that the recent rescue package will at least take some sting out of the tail of any possible downgrades. As we have seen in the US, some companies have been crushed by the credit crunch with the vast majority of financing options now out of reach.

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