Moody's downgrades outlook for UK banks to 'negative'

Moody's Investor Service showed a more downbeat stance on UK banks and cut the outlook to 'negative' from 'stable' in a report published on Tuesday.The credit rating agency explained that the downgrade in the outlook reflects the view that the improved operating environment and banks' stable financial fundamentals will not fully offset the negative credit implications of the UK resolution and bail-in regime and the related 'ring-fencing' framework."The key driver of the change in outlook to 'negative' for the UK banking system is that the UK government is now able to finalise the secondary legislation to implement the structural reforms relating to the UK resolution and bail-in regime and the related ring-fencing framework", said Carlos Suarez Duarte, a Moody's vice president, senior analyst and author of the report. Despite the gloomy outlook, Suarez Duarte did state that Moody's expected most of the UK banks' standalone baseline credit assessments to remain stable thanks to the country's stronger economic growth prospects. Moody's also noted that the negative outlook on the system was consistent with the outlooks on the country's six largest banks that comprise 93.6% of active current accounts. JM