Moody's puts Santander's UK arm on downgrade watch

Credit rating agency Moody's has placed Santander UK's long term debt and deposit ratings under review following the announcement last week that its parent may be downgraded.

Moody's said it has placed Santander UK's A1 long term bank deposit and senior debt ratings, as well as the bank's A3 subordinated debt rating, under review, although it does not expect a downgrade of more than one notch.

It comes after Banco Santander's standalone bank financial strength rating (BFSR), and its long term debt rating, were placed under review for possible downgrade along with many other European banks.

"As the review of Banco Santander is not expected to result in a downgrade of more than two notches of its long-term rating (currently Aa3), Moody's does not expect Santander UK to be downgraded by more than one notch and therefore the short-term Prime-1 rating is not affected," the agency said in a statement.

"The review of Santander UK's ratings is driven by the review and outcome for the ratings of its parent, and will focus on the impact that the potential lower creditworthiness of Banco Santander may have on the current parental support uplift of 2 notches in Santander UK's ratings."

Moody's adjusted the ratings of nine other European banks recently, warning the euro area crisis and the deteriorating creditworthiness of euro sovereigns was impacting on banks in the region.