WORLD
Fitch downgrades Bank of England to AA+
Baku, April 25 (AZERTAC). 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+'. 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 channeled 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. Fitch currently rates only the BoE's three-year-maturity USD bonds. The rating does not apply to typical central bank liabilities of the BoE, like bank notes or commercial banks' reserves that are monetary liabilities rather than rateable debt. The BoE's rating reflects its central role in the UK and international financial system. The rating is underpinned by support from the UK sovereign. The near certainty of sovereign support for the BoE derives primarily from its national strategic importance, as well as its ownership by the UK Treasury. On 19 April 2013 Fitch downgraded the UK's sovereign ratings to 'AA+' from 'AAA' The downgrade of the UK's sovereign ratings primarily reflects a weaker economic and fiscal outlook and hence the upward revision to Fitch's medium-term projections for UK budget deficits and government debt. Nevertheless, the UK's 'AA+' rating and Stable Outlook reflect its extremely strong credit profile. The rating is sensitive to any further changes in the UK sovereign rating.