Moody's lowers some Barclays, HSBC debt

Moody's Investors Service said it downgraded Barclays Bank plc's subordinated debt rating to Baa1 from A1 and its hybrid debt and preferred stock to Baa2 from A2, HSBC Bank plc's subordinated debt rating to A2 from Aa3 and its hybrid debt and preferreds to A3 from A1 and HSBC Holdings plc's subordinated debt rating to A1 from Aa3 and its hybrid debt and preferreds to A2 from A1.

The outlook for each company is negative.

These actions follow the downgrades of the subordinated and hybrid debt of Royal Bank of Scotland Group and Lloyds Banking Group on April 3 and were prompted by the agency's concern that systemic support may not be extended to these instruments in the case of financial distress.

The 2009 Banking Act explicitly provides a broad remit to allow the restructuring of financial institutions with losses to subordinated and hybrid debt holders, and Moody's said this has increasingly been the practice in the recent restructuring of a number of financial institutions in the United Kingdom. Therefore, it is the agency's opinion that the ratings of subordinated and hybrid instruments should no longer benefit from the support that is expected for senior creditors and depositors of these two large, systemically important institutions.

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