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UK Banks Slapped With Credit Downgrades

(c) Sky News 2012

Credit ratings agency Moody's has confirmed it is downgrading major UK banks and other global financial institutions because of their exposure to Europe (Chicago Options: ^REURUSD - news) 's economic turmoil.

The move potentially adds billions of pounds to the funding costs of the 15 institutions affected, which include Barclays (LSE: BARC.L - news) , HSBC (LSE: HSBA.L - news) , RBS (LSE: RBS.L - news) and Lloyds.

Among the others downgraded are Goldman Sachs (NYSE: GS - news) , JPMorgan Chase (Hanover: 850628 - news) , Bank of America (NYSE: IKJ - news) , Citigroup (NYSE: C - news) , Societe Generale (Paris: FR0000130809 - news) , Credit Agricole (Milan: ACA.MI - news) and Deutsche Bank (Xetra: 514000 - news) .

Sky's City editor Mark Kleinman earlier exclusively revealed that the announcement would be made after US markets closed for business on Thursday.

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He said: "This is going to have some impact on the funding costs of these banks.

"I think there'll be some relief in the City (on Friday) that the downgrades weren't more severe because it's certainly possible that Moody's could have gone further."

Banks have been under scrutiny amid the pressure facing the industry from the effects of the global financial crisis.

Kleinman said the move is part of the agency's wider reassessment of the health of banks.

The major ratings agencies have rushed to downgrade banks across the Continent in recent months, particularly as the eurozone's problems have intensified.

A cut last month to the credit rating of Santander UK, the Spanish-owned lender, triggered speculation about the safety of customers' savings which was quickly dismissed by the bank.

The latest wave of downgrades will bring many of the other UK banks in line with Santander UK and there will be no resulting impact on the security of their savings.

The downgrades range in scope from one notch to two notches depending on the particular institution.

As predicted, Barclays was given a two-notch downgrade, while HSBC, RBS and Lloyds were downgraded by one notch.

On Thursday bank shares lost value in late trading on the FTSE 100 (Euronext: VFTSE.NX - news) , with RBS the biggest faller of the main UK banks.