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Bank Of Scotland Rating

Sep 14 2013

The reason for the downgrade in the rating comes from the United Kingdom's decision to look into a breakup between their national lending institution and the Royal Bank of Scotland.  How this would go into effect remains unknown as both sides measure the value and risk of a de-merger.  Whatever the case, however, few investors look favorably upon a Royal Bank that no longer has the backing of the British Treasury behind it.

As such, the future for the Royal Bank of Scotland appears grim.  The UK government desires to maximize economic growth, but not at the expense to taxpayers, and the RBS represents an anchor at the moment.  By returning the RBS to the private sector, it is possible the bank may come under new ownership that could right their current course, but odds favor the bank getting worse before it gets better.  Moody's did, however, state that the risk of loss to bank creditors remains low, meaning that a default or a bankruptcy is likely not an option even if the debt rating drops.

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