Bank stocks fall as Moody's signals ratings cut

Bank stocks edged lower in early trading on Tuesday after credit ratings agency Moody's said it may cut its rating on 14 British lenders.

Royal Bank of Scotland was 0.24% lower at 41p while Lloyds Banking Group fell 0.55% to 51p.

The banks were named as institutions in line for a possible downgrade by Moody's over the next three months.

Decision would not driven by weaker financial positions, it said in a statement, but by a changing regulatory environment.

Bank of Ireland, Co-Operative Bank, Coventry Bulding Society, Nationwide Building Society, Newcastle Building Society, Norwich & Peterborough Building Society, Nottingham Building Society, Principality Building Society, Santander UK, Skipton Building Society, West Bromwich Building Society and Yorkshire Building Society are also in line for a possible downgrade.

"The reassessment is not driven by either a deterioration in the financial strength of the banking system or that of the government," said Elisabeth Rudman, a Moody's senior credit officer and lead analyst for a number of UK banks.

"It has been initiated in response to ongoing guidance from the UK authorities (the Bank of England, the Financial Services Authority and the Treasury) that banks that fail in the future should not expect capital injections from the public purse."

The eyes of the world's investors were on the European financial markets on Tuesday after a day in which eurozone debt fears saw the FTSE suffer its biggest one-day fall in two months.

London's leading index was almost 0.5% higher to 5,863 after finishing on 5,835 yesterday, a fall of more than 112 points.

Investor sentiment was hit by continued concerns over Greek debt and fresh fears over Belgium, which was hit by a revision to a negative outlook by ratings agency Fitch.

That followed Standard & Poor's decision to put Italy on a negative credit watch on Friday.

Overnight in the US, the Dow Jones declined more than 130 points to 12,381.