Moody’s threw another hurdle in the path of Barclays (NYSE: BCS), which continues to deal with a Libor scandal that has cost it $450 billion in fines, as well as the job of its chief executive, Bob Diamond. The credit rating agency issued a report about the risk of the lender’s debt:
Moody’s Investors Service has today changed the outlook on the C-/ baa2 standalone bank financial strength rating (BFSR) of Barclays Bank plc to negative from stable.
The report also said:
Moody’s decision to change the outlook on Barclays’s C-/ baa2 standalone rating to negative from stable reflects the rating agency’s concerns that the senior resignations at the bank and the consequent uncertainty surrounding the firm’s direction are negative for bondholders. Specifically, the shareholder and political pressures on Barclays, which resulted in the resignation of the bank’s CEO, COO (previously the head of the investment bank) and the stated intention of the Chairman to resign, could lead to broader pressure on the bank to shift its business model away from investment banking and reform perceived failures in its business culture.
The business model is not the most serious threat to the UK bank. Investigations into Libor manipulation, which continue to spread to other banks, could cost Barclays billions more in fines and the jobs of many senior bankers.
Douglas A. McIntyre