Terry Murden: Credit agencies behind the curve over downgrades Published on Sunday 24 June 2012 01:54 ANOTHER week, another few days of turbulence for the banks, culminating in a double-whammy for Royal Bank of Scotland, which was irritated by the latest credit-rating downgrade and then plunged into a customer backlash over an IT breakdown. And there could be more fury this week when the Financial Services Authority publishes the results of its investigation into interest rate swaps, products sold to companies to hedge against changes in rates. Critics, including thousands of businesses, believe it is a mis-selling scandal similar to those that have blighted pensions, endowment policies and payment protection insurance. The banks, however, have been defensive on the issue and a robust response is expected that is indicative of a growing mood of indignation at the top of the banks. After being flogged to the point of exhaustion over the 2008-9 debt crisis, excessive executive pay and weak lending to small firms, they believe it is time they got some credit for the progress made in recent years. Friday's bold reaction from RBS to the latest downgrading by credit rating agency Moody's supports such a view. Even in their still-fragile condition the banks are far from friendless. Shares in most of them were marked higher or barely moved after the downgrades even though the FTSE 100 fell. The effects of the downgrade had already been priced in and, as some of the changes in grade were less severe than expected, it encouraged investors to give the banks some support and diminished any immediate threats of a hike in borrowing costs or other charges. When thousands of customers are unable to properly access their accounts it may not be a good time for the banks to claim any bragging rights. But they have bolstered their cash reserves, de-risked balance sheets and offloaded non-core assets. In a strongly-worded statement on Friday, RBS was keen to emphasise how it had substantially reduced its loan-to-deposit ratio and, therefore, its dependency on wholesale markets. Moody's and the other agencies will argue that the banks remain highly vulnerable to a worsening eurozone crisis, a slowing of world growth and the need to make themselves more independent of government support. But Moody's and the others are to some degree behind the curve and it is not obvious that the downgrade takes into account recent attempts to relax the restrictions placed on the banks. The Treasury and Bank of England have announced cheap loans that will ease pressure on costs. There could be some further help this week when the Bank of England's Financial Policy Committee, which monitors risk to the system, is expected to ease the rules on the reserves banks must hold. This should open the gates for more lending, a move that will surely win the banks a few brownie points. Bolland exposed by M&S turmoil PRESSURE is mounting on Marks & Spencer boss Marc Bolland after the latest defection from his senior ranks. Richard Price, head of menswear, has joined Sir Philip Green's Bhs, having been tipped to succeed Kate Bostock, highly-regarded head of non-food, should she leave. Price's exit follows other management departures and a denial from the company that there is instability at the top. Sales of mens- and womenswear are down and so are the shares. Bolland will have to take note. RBS credit rating takes a hit amid fears of bail-out No2 Royal Bank of Scotland was dealt a major blow yesterday when its credit rating was cut to reflect the reduced likelihood of further government support in any financial crisis. Daniels' shock decision leaves Widows shaken and stirred WITH Mike Ross's shock imminent departure from Scottish Widows coming just weeks after he said he had no intention of retiring early, it seems that the review of parent group Lloyds TSB's businesses by new chief executive, Eric Daniels, who joined the company from Citibank in 2001, has not put internal communications high on the agenda. Tiner in eye of a storm TOMORROW evening a courier will arrive at the Canary Wharf headquarters of the Financial Services Authority with a parcel of legal documents marked for the attention of John Tiner, the regulator's chief executive, that could make or break his career. Investors put their money into banks on dividend hopes Meltdown 2: Four years after the credit crunch, are we heading for another economic disaster? IN MANY ways, 9 August 2007 was just an average summer day. The UK holiday season was in full swing, house prices were rising, and newly elected Prime Minister Gordon Brown was reaping all the political benefits of an economy growing at a robust clip of more than 3 per cent.