Ratings agencies cut outlook for Barclays

Fri Jul 6, 2012 12:35am EDT
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By Matt Scuffham and Chris Vellacott

LONDON (Reuters) - Credit rating agencies turned up the heat on Barclays Plc, threatening to lower its credit ratings on concerns over who will run the bank following the departure of Chief Executive Bob Diamond and an uncertain strategy.

Barclays is in turmoil following an interest rate-rigging scandal that led to the departures of Diamond and Chief Operating Officer Jerry del Missier on Tuesday and is under pressure from politicians and regulators to change its culture, possibly slimming down its investment banking operations.

"Although this could have potentially positive implications over the longer term, the uncertainty surrounding such a change in direction is credit-negative in the short term," said Moody's, which lowered its outlook for the standalone bank's financial strength to negative from stable.

Barclays was last month fined nearly half a billion dollars for its part in manipulating a key interest rate which underpins financial transactions worth an estimated $360 trillion.

Reuters reported on Thursday that Britain's financial regulator warned the entire Barclays' board in February that the bank's culture needed to change.

S&P on Thursday lowered its outlook for Barclay's long-term rating to negative from stable citing management upheaval and the strategic uncertainty currently facing the bank.

"We see potential for the eventual new CEO to review the current scope of Barclays activities, particularly if that person were an external hire," it said.

Fitch said the impact of the Libor investigation didn't alter its view on Barclays and said it was premature to speculate about any change in strategic direction.   Continued...

Barclays bank former Chief Executive Bob Diamond leaves after giving evidence to the Treasury select committee in Westminster, London July 4, 2012. Bob Diamond faced a grilling by British lawmakers on Wednesday, a day after quitting as Barclays' chief executive over an interest rate rigging scandal.REUTERS