Ratings agency Standard & Poor's has lowered its credit ratings on Ulster Bank after a reassessment of its importance to parent company Royal Bank of Scotland.
Ulster Bank (UBL) and its subsidiary in the Republic, Ulster Bank Ireland (UBIL), have had their ratings lowered to A from A+. The short-term counterparty credit ratings on the two banks were reaffirmed and it retained its stable outlook on them.
S&P said the change was made because government-owned RBS will remain 'strategically constrained' into the medium term.
The agency said that while it believes Ulster Bank will remain an important part of RBS, it sees 'some incremental risk' that Ulster Bank's role and standing within the group might change in the long term if this would improve or accelerate returns to the UK taxpayer.
Due to this uncertainty it now considers Ulster Bank to be 'strategically important' to RBS, rather than 'core'. The stable outlook reflects an expectation any restructuring of Ulster Bank will be successful.
Ulster Bank said it did not comment on rating agency changes.
S&P credit analyst Giles Edwards said: "We expect that Ulster Bank will be supported by further capital injections and, where necessary, funding support from RBSG, leading to a gradual strengthening of its stand-alone credit strength over the coming years. However, we think it likely that RBSG will remain in a degree of strategic flux over the medium term, with policy ultimately guided by the UK government, RBSG's majority shareholder."
He said S&P could lower the ratings again if Ulster Bank failed to make acceptable progress to meet RBS expectations and targets.