THE GUARDIAN: British banks and building societies lose rating while pressure mounts on EU to restore faith in single currency
The eurozone crisis intensified on Friday when Spain and Italy were downgraded by the ratings agency Fitch, heightening fears over the health of Europe's banks.
Fitch's move came at the end of a day which had already seen 12 UK banks and building societies downgraded by the rival agency Moody's and amid speculation about co-ordinated European action to bolster the finances of the continent's banks by next weekend.
The euro fell against most major currencies, piling fresh pressure on European politicians to restore confidence in the single currency. Germany's Angela Merkel said Europe needed to find a solution for its banks by 17 October. Analysts from Capital Economics estimate the total financial package may top €200bn (£172bn).
Merkel and Nicolas Sarkozy of France are due to meet in Berlin on Sunday to discuss the crisis, with bank recapitalisation expected to be at the heart of their negotiations.
George Osborne attempted to distance UK banks from the crisis, despite speculation that there might need to be a fresh capital injection into British institutions, particularly Royal Bank of Scotland. He said: "People ask me how are you going to avoid Britain and the British taxpayer bailing out banks in the future. This government is taking steps to do that … I'm confident British banks are well capitalised, they are liquid, they are not experiencing the kinds of problems some of the banks in the eurozone are experiencing at the moment." » | Jill Treanor and Patrick Wintour | Friday, October 07, 2011
