Standard & Poor's Ratings Services downgraded a spate of European banks on Tuesday, saying new regulations make "extraordinary government support" less likely for some banks and harder to predict for others.
The agency lowered its ratings on banks including Barclays PLC, Credit Suisse Group AG, HSBC Holdings PLC, Lloyds Banking Group PLC and Royal Bank of Scotland Group PLC. The ratings on those banks are still investment-grade, although S&P's "BBB-" rating on Royal Bank of Scotland is only one notch above "junk" status.
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In April the European Union adopted a new set of rules that were intended to minimize the risk and cost posed by failing banks. The law created a body that can unwind or restructure failing banks, and a new system will make sure that the banks' creditors, not governments, take losses first when lenders fail. The rules went into effect Jan. 1.
Standard & Poor's said it lowered its ratings on the U.K. banks and Credit Suisse because it is now less likely governments will take "extraordinary" action to benefit the banks' senior creditors and that those actions will become "less predictable" for U.K., German and Austrian banks. The firm added that it still has questions about how the law will work in practice.