Moody's changes outlook on UK banking system to negative

FXStreet (Łódź) - Moody's ratings agency announced on Tuesday that it had downgraded the outlook on UK's banking system from stable to negative, due to expectations that "the improved operating environment and banks' stable financial fundamentals will not fully offset the negative credit implications of the finalisation of the UK resolution and bail-in regime and the related 'ring-fencing' framework," according to the official statement.

The ratings agency also said that: "In addition to the resolution and bail-in regime, UK banks' also face continued exposure both to conduct and litigation charges and to other costs that might constrain profitability and erode capital for some banks."

The report focuses mainly on UK's six largest financial institutions to which negative outlooks have been also assigned, adding however that smaller banks and building societies should stay stable throughout the outlook period.

"Pretty much a stick you can level at most banking systems at the moment," suggests Ryan Littlestone from Forex Live. "I also can’t see how bail ins are finding their way into the language as they’ve been part of the UK banking act since 2009."

The pound eased to 1.6876 following the release.