Fitch Ratings has downgraded the Bank of England’s (BoE) Long-term Issuer Default Rating (IDR) to ‘AA+’ from ‘AAA’ following the downgrade of the UK sovereign rating on 19 April 2012. The senior unsecured Short-term rating has been affirmed at ‘F1+’. The Outlook is Stable.
KEY RATING DRIVERS
BoE’s Long-Term IDR is directly aligned with that of the UK government. The BoE is the monetary arm of the UK sovereign and as such its credit profile is aligned with that of the sovereign government.
While central banks have unlimited capacity to create base money, in practice the net present value of seigniorage, the profit from money creation, is limited and typically channelled to the government. This reinforces the close link between the central bank and the sovereign ratings. The monetary financing flexibility and the international reserve currency status of the sterling are already reflected in the UK’s sovereign ratings.
For the full rating visit Fitch Ratings website
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