The global ratings agency Moody's announced today that it has upgraded its outlook for the UK's banking industry from negative to stable.
The change is a reflection of recent positive indicators showing the UK's economy is stabilising as well as the implementation of new, stricter banking regulation, Moody's said.
"Overall, we believe that UK banks are sufficiently well capitalised to absorb expected losses from both our central and adverse scenarios," Moody's said.
"Once the large UK banks execute their capital plans to address the additional capital buffer requirements recently imposed by the Prudential Regulation Authority (PRA), Moody's believes that UK banks will be well capitalised for the risks they face and will compare favourably to their European peers."
The ratings agency said it expects the UK's banks' profits to recover in the future, but warned that low interest rates as well as the costs involved in implementing new regulation could lead to one-off charges that might damage that profitability.
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