RBS is downgraded by ratings agency in blow for UK banking
THE Royal Bank of Scotland has been dealt a new blow after being downgraded by the ratings agency Standard & Poor’s last night.
It was among a number of banks reduced from “stable” to “negative” because of industry failures in areas including money laundering and payment protection insurance.
The announcement came as Vince Cable urged the Treasury to slow down its plans to sell off the bailed-out Royal Bank of Scotland.
The Business Secretary said the sell-off was “not in any sense urgent”, indicating his concerns that Treasury ministers are acting too quickly on the issue.
The downgrade will affect RBS’s ability to borrow and could impact on its share value.
However, the banking giant played down the significance of the move. In a statement, it said: “S&P has specifically highlighted that this is an industry action and does not reflect a deterioration of RBS’s individual creditworthiness.”
Virgin Money and Yorkshire Building Society were also downgraded to negative from stable.
Financial experts said any impact of the downgrading on the bank’s share prices would be “negligible”.
Sandy Chen, of Cenkos, said that the move simply pulled RBS into line with its competitors.
“Every other major bank has a negative outlook, including Bar- not give up on its plans to split up RBS and Lloyds Banking Group to bring back competition in the sector. He said. “From a policy point of view, it would be better if we had more competing institutions.”
Mr Cable insisted that breaking up the banks would not necessarily interfere with a selloff. He said: “You could sell it [RBS] off in bits and create more competition. There is a point at which the two issues – competition and ownership – intersect.”
Mr Cable also expressed concerns that the RBS stake could be sold off at a loss to taxpayers. Earlier this month, the RBS share price was £3, well below the £5 paid by the UK government in 2008.
Yesterday, the SNP Treasury spokesperson Stewart Hosie MP reacted to Mr Cable’s remarks, saying: “The most important thing, if and when the UK government sells the Royal Bank of Scotland, is that taxpayers are not left out of pocket. It is far better that the UK government takes its time, if it means getting it right.”
Mr Cable’s comments follow reports at the beginning of May that RBS and the partstate-owned bank Lloyds could be sold before the UK general election, at share prices well below the levels the government paid for them when they were saved from collapse at the height of the 2008 crisis.
Opponents of the coalition have been critical of the idea of a sell-off that does not offer the taxpayer value for money.