UK banks are no longer rated 'most stable.' Standard & Poor's publishes a list entitled "Banking Industry Country Risk Assessments," or BICRA. The list rates and groups the banking industries of various countries on a scale from 1 to 10, with 1 being the most stable. The groupings are determined by weighing gross problematic assets, banking regulations, and the strength of the local economy, among other factors. Group 1 consists of Australia, Canada, Finland, France, Netherlands, Sweden, and Switzerland.
The UK was recently downgraded from Group 2 rating to Group 3, after being downgraded to Group 2 in December. Other banking systems rated as Group 3 are the United States, Austria, Chile, Portugal and Saudi Arabia. Specific causes for the downgrade were the tough UK economy and the high levels of household and government debt that will be a drag on any banking recovery. Ireland was downgraded to Group 4 at the beginning of the year. Perhaps this is a precursor to a downgrade of the UK's sovereign debt rating? Recently S&P said it may downgrade Japan's sovereign debt and revised its outlook on Japan's "AA" long-term government bond rating to "negative" from "stable."
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