Moody's Downgrades RBS Rating From Aa1 To Aa3

Moody's Investors Service has downgraded all long term ratings of Royal Bank of Scotland plc (RBS) and of the holding company, Royal Bank of Scotland Group plc. The senior unsecured rating of RBS was downgraded to Aa3 from Aa1 with

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Moody’s Investors Service has downgraded all long-term ratings of Royal Bank of Scotland plc (RBS) and of the holding company, Royal Bank of Scotland Group plc. The senior unsecured rating of RBS was downgraded to Aa3 from Aa1 with a negative outlook. The Bank Financial Strength Rating (“BFSR”) was lowered from B to C- and remains under review for further possible downgrade. The Aa2 senior debt rating of the holding company was downgraded to A1, also with a negative outlook. The short-term P-1 ratings of both entities were affirmed. The government backed ratings assigned to the debt instruments benefiting from UK government guarantee remain Aaa. The bank’s hybrid instruments were downgraded by two notches, and some remain on review as detailed below.

The downgrades reflect Moody’s expectation of significant future losses beyond those indicated by the bank for 2008. These losses are likely to be driven by a combination of loans to lower-rated corporates as default rates rise, and commercial property exposures in the weakening markets of Ireland and the UK, as well as residential property and other consumer lending exposures in the US. Moody’s considers the bank’s underlying capital adequacy to be in line with a BFSR in the D range. However, it is maintaining the rating at C-, under review for possible further downgrade, until it becomes clearer how the government’s Asset Protection Scheme will affect projected losses. The bank’s long-term rating was downgraded to Aa3 as a reflection of the same factors, but also incorporates Moody’s view on the long-term credit profile of RBS beyond the current government support-phase as well as the very high probability of on-going support from the Aaa-rated UK government.

Please visit www.moodys.com to get more detailed information.

D.C.

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