for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up

UPDATE 1-Moody's says UK on a par with other AAA nations

(Adds comments on banks, background)

LONDON, Jan 22 (Reuters) - Britain’s sovereign debt rating is no weaker than that of other nations with the triple-A grade, despite the government’s bailouts for banks and economy-boosting measures, ratings agency Moody’s said on Thursday. In a report about recent measures to help the ailing banking sector and encourage lending, Moody’s Investors Services said the government would have enough room to cut taxes and spending to repair the public finances once the economy recovers.

Moody’s report comes after rival credit rating agency Standard & Poor’s affirmed Britain’s triple-A rating and stable outlook last week amid public concern about the scale of government borrowing during the economic downturn.

Credit ratings for euro zone members Spain, Portugal and Greece have recently been cut because of deteriorating public finances.

“Our opinion is that deterioration in the strength of the government balance sheet is material, but we remain of the view that it does not make the UK a clear outlier in the Aaa category that is being affected by the worldwide crisis,” Moody’s said.

“We believe the UK has enough vitality as an economy to rebound once the effects of the balance sheet clean-up by households in particular stops exerting its depressive effect.”

Britain announced a multi-billion pound package to boost bank lending on Monday, the second time it has thrown its banks a lifeline in three months.

Banks will be able to insure themselves against losses on their riskiest assets and get guarantees on their debt. Britain will also set up a 50 billion pound fund to buy up high-quality securities like corporate bonds to get cash flowing again.

“The measures announced should help ease the significant pressures on liquidity, capital, lending levels and confidence experienced by the UK banking system,” the report added.

It said it was premature to fully gauge the impact on the ratings of British banks. “All these measures, once implemented, should ceteris paribus (all other things being equal), have a positive impact on the analysis of bank financial strength and should help to stabilise bank ratings,” it added.

The government owns 43 percent of Lloyds Banking Group LLOY.L and raised its stake this week in Royal Bank of Scotland RBS.L to 70 percent.

It injected 37 billion pounds into the banks in October to shore up their capital base, but lending remains weak because of fears of bad loans and the departure of Icelandic and Irish banks from the British market.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up