Business correspondent(reuters/wp):
British banks could face potential credit rating downgrades if there is a disorderly Brexit as this would be likely to trigger a domestic political crisis and economic contraction, credit rating agency Standard & Poor’s said on Thursday.
British banks could face potential credit rating downgrades if there is a disorderly Brexit as this would be likely to trigger a domestic political crisis and economic contraction, credit rating agency Standard & Poor’s said on Thursday.
British banks could face potential credit rating downgrades if there is a disorderly Brexit as this would be likely to trigger a domestic political crisis and economic contraction, credit rating agency Standard & Poor’s said on Thursday.
British banks could face potential credit rating downgrades if there is a disorderly Brexit as this would be likely to trigger a domestic political crisis and economic contraction, credit rating agency Standard & Poor’s said on Thursday.
Fitch Ratings, a rival ratings agency, said that UK banks are well funded to face a no-deal Brexit, but could face challenges if wholesale markets were disrupted for a lengthy period.
“Their ratings should be able to withstand economic deterioration in the no-deal scenarios,” Fitch said in a statement.
S&P reiterated warnings from the Bank of England on Tuesday that derivatives markets face disruption from a no-deal Brexit unless the EU allows EU customers to continue using LCH, part of the London Stock Exchange, that clears the bulk of euro denominated swaps.
Some euro clearing of these transactions has already moved to rival central counterparty (CCP) Eurex (DB1Gn.DE) in Frankfurt.
The EU is in the process of introducing a law that would require LCH to be supervised by the bloc’s regulators as well as the Bank of England if it wants to continue serving EU customers.
“While dual supervision could yet be a negotiated middle ground for one or more U.K. CCPs, it appears challenging to apply effectively in practice, not least when clear and rapid decision making is required in a crisis,” S&P said.
Clearing houses such as LCH act as a financial backstop if transactions they handle run into trouble.
Pressure to shift euro clearing would moderately affect LCH, S&P said.
“Our base-case view is that LCH Ltd will maintain its market leading franchise in OTC interest rate swaps following Brexit, and an (ratings) upgrade would depend on us becoming increasingly confident in this outcome,” the agency said.
Fitch said there would be significant negative consequences for banks and financial stability if no interim solution was in place for derivatives ahead of a no-deal Brexit.
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