You may have seen in the news recently an announcement regarding credit ratings of financial services providers from Moody’s. Just like individuals, all banks have a credit rating, which determines if they can borrow money, for what period and how much. Bank credit ratings are given by companies known as credit rating agencies.
During the financial crisis in 2008 the UK Government rescued several banks. Whilst the Co-operative Bank did not require Government support, Moody's factored into their ratings that UK banks would get Government support if needed.
However, since then there has been ongoing guidance from the UK authorities (the Bank of England, the Financial Services Authority and the Treasury) that banks should not expect to receive the same level of financial support from the Government. Therefore, Moody's believe the Government would now be generally less likely to offer support if required. As a result, Moody's announced in May 2011 a review of the level of Government support included in the ratings of 14 UK banks and building societies. The outcome of this review was announced on Friday 7 October.
Compared with up to five notch downgrades in the ratings of some of our competitors, the Co-operative Bank’s rating has been reduced by one notch.
The review does not alter the strong financial status of the Co-operative Bank, which remains secure and has done so throughout the financial crisis and subsequent economic downturn, during which we have not had to rely on any financial support from the Government.
In fact, Moody’s has improved the Bank’s stand-alone credit rating in acknowledgement of this underlying strength by two notches. The Bank was one of only five financial institutions to receive a stand-alone ratings upgrade as part of Moody's review.
Many customers continue to be attracted to the Bank because of our trusted brand and long term position of financial strength which have enabled us to continue supporting customers despite the current difficult economic environment. Last year, we saw a 79% increase in customers switching their current accounts from rivals, and since 2007 we increased lending to business by more than 40% whilst many of our competitors scaled back lending during this time.
We believe the Moody’s announcement will have no significant impact on the financial strength of the Co-operative Bank.