However, given the recent downgrade of the UKs credit rating by Moody’s from AAA to AA the award of capital relief may be disappearing from view explained Tony Ward, chief executive of Home Funding Limited.
Ward said: “If a lender is relying on unfunded credit protection, where there is no cash on the table to support the guarantee, but it is backed by a sovereign state with a AAA credit rating it is usually easier for the lender to get capital relief from the regulator.”
But Ward said the UKs downgrade by Moody’s may hamper that chance.
He added: “All eyes will be on Fitch and Standard and Poor’s next move as there was a general opinion that they would be taking a look at the budget and then probably follow suit and downgrade us which looks more likely as the debt to GDP ratio goes up and our growth rate is going down.”
A spokesman from Fitch ratings said: “In line with our guidance after the Autumn Statement, Fitch will conduct a formal review of the UK rating in 2013 incorporating detailed analysis of this week’s budget announcement.”
Fitch placed the UK's AAA rating on “negative outlook” in March 2012.
Standard & Poor's director of communications Mark Tierney said the ratings firm was examining the details of the Budget and had no further comment at this stage.
In response to the question of whether capital relief will be granted by the regulator and the impact of further downgrades, a spokesman from the FSA said: “We are in discussions with the Government on issues including capital relief.”
