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September 15, 2009

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British banks in Moody's sights

THE British banking sector's creditworthiness is set to remain under pressure for the next 12-18 months, as rising bad debts on the back of a weak economy weigh on lenders' profits, credit rating agency Moody's said yesterday.

"Moody's maintains its negative outlook for credit conditions for the UK banking sector. We expect the sustained weakness of the macroeconomic environment to continue to feed into higher loan arrears with ensuing pressures on profitability," the agency said.

However, it did not expect to make many downgrades to banks' credit ratings over the next 12-18 months, as the sector's current ratings largely reflect the risks it faces.

Moody's said banks' creditworthiness had also been bolstered by about 120 billion pounds (US$198.6 billion) in fresh capital since the onset of the financial crisis in 2007.


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