Just before lunchtime, a rumour began to do the rounds, courtesy of Sky News, that credit ratings agency Fitch was going to bring more bad news for Britain’s banks. A credit rating downgrade of major banks was possible later in the day. Sky changed their tune and withdrew the statement on TV, but the blog post remained, and now the downgrade has happened.

Mark Kleinman, Sky’s business editor, has some good connections and he proved this today with his blog post about a new downgrade of major high street banks by the ratings agency.

It would turnout to follow another one of the big ratings agencies, Moody’s, downgrading major banks and building societies last week.

An extract from Mark’s post:

Fitch is understood to have told the country’s major high street lenders to expect a statement about the review for downgrade after the stock market closes today. It’s possible that the statement will be brought forward now that I have disclosed the development.

The review will include our giant banks such as Barclays, Lloyds Banking Group and Royal Bank of Scotland (RBS).

Not too long after that, Sir Alan Sugar tweeted this:

Between the two of them, and whoever else decided to act on that information, shares did a little whoops, in the wrong direction, and the announcement was brought forward.

Fitch’s decision was similar to that of Moody’s – these banks are in trouble and it’s difficult to place full confidence in them moving forward:

The revision … reflects Fitch’s view that support dynamics are changing in the UK. The banking system is not only large relative to the UK economy, but there is also more advanced political will to reduce the implicit support for the country’s banks, building on The Banking Act 2009 and, more recently the various policy recommendations of the Independent Commission on Banking (ICB).

Both RBS and Lloyds are government-backed banks and have subsequently seen their long-term ratings drop from AA- to A.

At the time of writing this, Lloyds was down nearly four per cent, Royal Bank of Scotland nearly three per cent and Barclays a shade below five per cent.

[Source: SkyNews, SkyNews]