Moody's Investors Service has downgraded the credit ratings of 12 British banks over concerns that the government will not provide adequate support to the institutions if they become financially troubled.
The credit rating firm said Friday that the downgrades were caused by a "reassessment of the support environment in the U.K." It said recent government moves have "significantly reduced the predictability of support" for the financial firms over the "medium to long-term."
The affected firms include the government-controlled Royal Bank of Scotland, which had its rating slashed by two levels. The debt rating of Lloyd's TBS Bank was reduced by one level.
Moody's says the British government is likely "to allow smaller institutions to fail." But said it does not believe there has been a deterioration in the financial strength of the banking system or the British government, saying the government is likely to continue to provide "some level of support to systemetically important financial institutions."