UK bank reforms negative for bondholders, Moody's says

13th Oct 2014 10:31

Recent proposed structural reforms released by the UK's Prudential Regulation Authority (PRA) are negative for all large bank bondholders, Moody's warned in a note published on Monday."The proposed hanges are credit negative for all bondholders of large UK banks because they remove some key obstacles to the effective resolution of these institutions and the bail-in of their bondholders," the credit rating agency explained in its Credit Outlook publication.The PRA's implementation of these reforms is scheduled to be fully carried out by 1 January 2019.The proposals will be implemented in conjunction with the introduction of minimum total loss-absorbency capacity levels, lower leverage and higher liquidity requirements."However, these additional levels of protection will not benefit bondholders of ring-fenced banks and non-ring-fenced banks equally because their risk in the event of resolution will depend on which legal entity needs to be recapitalised," Moody's explained.