Standard & Poor’s Says UK Banking System Sucks

Standard & Poor’s released a report named ‘Banking Industry Country Risk Assessment: United Kingdom,’ where they stated “We no longer classify the United Kingdom among the most stable and low-risk banking systems globally.” That’s a nice way of saying the British banking system sucks.

Not that long ago the United Kingdom banking system had been considered among the most low-risk and reliable in the world.

The underlying foundational problem according to S&P is the extremely poor British economy, which will hold back credit profile of British banking.

“This is due to our view of the country’s weak economic environment, the reputational damage we believe has been experienced by the banking industry, and what we see as the high dependence on state-support programs of a significant proportion of the industry,” said the S&P report.

The report added that as the banks try to unwind the enormous levels of debt, that will have a strong, negative impact on the performance of the banks, as well as the overall British economy. Gee, and I thought we were in economic recovery. Other recently released data shows the “recovery” in Britain came at a growth rate of 0.1 percent in the fourth quarter.

According to Ian Williams, chief executive officer of gilt fund Charteris Portfolio Managers, the U.K. will grow at a pace of less than one percent over the next three to four years, he said in a Bloomberg Television interview, adding, “We place a 40 percent probability on the U.K. falling back into recession and further cuts in interest rates.”

The S&P added UK banking will me more affected by this than most other banking systems in mature market economies, specifically citing “Canada, France, and Germany.”

Chancellor of the Exchequer Alistair Darling has been under increasing criticism for the $1.62 trillion given to the UK banking industry by the government, which he is battling back against saying the plan he has in place will be ““We have the fastest deficit reduction plan of major economies.”

Somehow I don’t think this will make the British people feel any better about their economic prospects over the next several years because Alistair Darling has an unproven plan in place built to reduce their deficit quicker than similar economies.

With the British economy sure to remain level or possibly contracting even more, you do wonder how the Darling plan will raise the capital to cut their enormous deficit.