Rating agency Moody’s have given an almost junk-bond status to the building societies of the UK. The Building Society sector which holds several accounts of British citizens is heading for massive losses due to housing market crash. For example Chelsea Building Society, which has holds accounts of thousands of savers and 90,000 mortgage borrowers, saw its bank financial strength rating or BSFR drop from C to E+ while raying of West Bromwich, the seventh largest society fell from C- to E+.
Other building societies like Britannia, Norwich, Principality, Newcastle, and Peterborough, Skipton, and Yorkshire Building Societies were all downgraded from C to the D band. Moody’s blamed the low ratings on the global financial crisis which will lead to greater credit losses than previously anticipated especially in the buy-to-let and self-cert markets. The societies reacted strongly to these ratings.
A spokesman for Chelsea Building Society said the ratings agency was reacting sharply after its own inability to locate the unfolding credit crisis in 2007-08. Chelsea said it had passed the Financial Services Authority’s (FSA) stress test and had gained profits from savings inflows over the last year. It also said that its arrears and repossessions had stabilized in recent months.