By Cassie Chambers
Fifteen major banks in the UK have had their credit ratings downgraded by the credit rating agency Moody's.
Barclays, HSBC and the Royal Bank of Scotland (RBS) are among the financial institutions affected by today’s decision. Lloyds bank had its credit rating cut in a separate announcement.
The managing director of Moody’s Global Banking, Greg Bauer, said the move came in response to the current economic climate.
He said: "All of the banks affected by today's actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities.
"They also engage in other, often market leading business activities that are central to Moody's assessment of their credit profiles.
"These activities can provide important 'shock absorbers' that mitigate the potential volatility of capital markets operations, but they also present unique risks and challenges."
RBS said it "disagrees with Moody's ratings change", saying it feels the decision is "backward-looking and does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile".
The credit downgrades will increase the cost of borrowing for these banks. Added costs are likely to be passed on to UK consumers through higher rates attached to mortgages and loans.
After the Moody’s decision, HSBC is the only UK bank that remains in the top-tier of the banking league tables.
The credit rating agency says HSBC has stronger buffers or "shock absorbers" which means their exposure to the European sovereign debt crisis is more contained. None of the UK banks, however, have been downgraded to a level that indicates junk status.