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Markdown costs Yorkshire in the wholesale market

Yorkshire Building Society says it must pay around 0.4 per cent more for wholesale funding than a AAA-rated firm.

In October, Moody’s downgraded YBS from Baa1 to Baa2.

The agency also downgraded 11 other financial institutions as a result of a reduction in the likelihood of Government support for systemically important institutions.

Giving evidence to the Treasury select committee last week, YBS corporate development director Andy Caton said the society faces higher wholesale funding costs than a firm with a Moody’s AAA rating.

He said: “It is quite difficult to judge the impact on the cost of funds in a market dislocated in terms of pricing but I would guess the extra cost of funds for Yorkshire compared with a AAA rated firm would be around 30 to 40 basis points on a new five-year issuing.

“More cost is brought in and ultimately that may get passed on to consumers but the impact really is further down in the sector with the smaller players who perhaps do not have such established wholesale market franchises.”

Moody’s downgraded seven other building societies, including Nationwide, Principality, Skipton, Newcastle, Norwich & Peterborough, Nottingham and West Bromwich.

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