UUn­nc­ceer­rt­taai­in­nt­tyy hhaass lliimmiitteedd ssh­hoor­rtt--tteer­rmm iimmppaacctt oonn bbaannkkss

Financial Mirror (Cyprus) - - FRONT PAGE -

On 18 Septem­ber, Scot­tish vot­ers will be able to vote in a ref­er­en­dum on in­de­pen­dence from the UK (Aa1 sta­ble), but the evo­lu­tion of the polling has led to height­ened mar­ket vo­latil­ity, Moody’s In­vestor Ser­vice said. Un­cer­tainty over the out­come has also prompted in­ten­si­fied in­ter­est from the cus­tomers, de­pos­i­tors and cred­i­tors of banks ex­posed to a pos­si­ble in­de­pen­dence sce­nario about the po­ten­tial im­pli­ca­tions for them. Moody’s be­lieves that any po­ten­tial short-term risks that could there­fore arise for banks are mit­i­gated by the ac­tions that the banks, as well as the Bank of Eng­land, have taken. Th­ese risks are par­tic­u­larly rel­e­vant for banks regis­tered in Scot­land that have a rea­son­able pro­por­tion of fund­ing, as­sets or op­er­a­tional ex­po­sure to this re­gion, namely: the Royal Bank of Scot­land (Baa1 neg­a­tive, D+ neg­a­tive/ba1), Lloyds Bank (A1 neg­a­tive, C- sta­ble/baa1) and Cly­des­dale Bank (Baa2 sta­ble, D+ sta­ble/ba1). The mea­sures taken to coun­ter­act the short-term risks are: - Banks have put in place con­tin­gency plans, which Moody’s be­lieves to be ex­ten­sive. In the rat­ing agency’s view, th­ese would in­clude a sig­nif­i­cant in­crease of their on and off bal­ance-sheet liq­uid­ity, a re­duc­tion in their short-term fund­ing re­quire­ments and a con­sid­er­able in­crease in cash cush­ions avail­able to meet any in­creased with­drawal de­mands. Moody’s also ex­pects th­ese banks to have tem­po­rar­ily boosted their op­er­a­tional ca­pac­ity to face higher trans­ac­tion vol­umes. - Aside from con­tin­gency plans pre­pared by each of th­ese banks, the Bank of Eng­land has stated that it has taken con­tin­gency mea­sures and re­it­er­ated its abil­ity and will­ing­ness to be a fully ef­fec­tive lender of last re­sort to all UK banks over the fore­see­able fu­ture, ir­re­spec­tive of their domi­cile in Eng­land or Scot­land.

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