Moody’s Cuts Rating on 12 UK Financial Institutions

“Moody's believes that the government is likely to continue to provide some level of support to systemically important financial institutions, which continue to incorporate up to three notches of uplift.

However, it is more likely now to allow smaller institutions to fail if they become financially troubled,” Moody’s said in a statement.

In addition, Moody's downgraded nine Portuguese banks on Friday, citing the increased risk linked to their holdings of government debt.

Moody’s cut Lloyds TSB Bank and Santander UK by one notch to A1 from Aa3 and the Co-Operative Bank by one notch to A3 from A2.

RBS and Nationwide Building Society were downgraded by two notches and seven smaller building societies were cut by one to five notches.