Of course, what is really bad for business is that the solvent banks like HSBC do not want to offer all the lending that the market suggests they could - this leads to firms wanting to borrow to go back to RBS and Lloyds, even as the interest rates creep up.
So a set of bank downgrades will lift the overall cost of borrowing in the UK, albeit not by too much.
However, many of the more complex transactions that banks have entered into have various default clauses in them - mainly against the customer not paying the interest, but some on the Bank for non-performance. One such frequent clause is the rating status of the lending bank. Thus the bank can be in default on its own obligations - remedies for this will of course be costly for the Bank in question.
In addition, may banks are in the clover due to the Swaps they sold to protect against rising interest rates which then collapsed in 2008. This means the banks are in a big profits on these swaps, even the the assets they lent against have fallen in value. The twist of the downgrade is customers being in a position to negotiate a set off of one against the other.
None of this makes pleasant reading if you are a major clearing bank today. In as much as people don't care they soon will if the crisis continues to deepen and the banks seize up altogether, shafted by the complexity of their position and inability to cope with the macro mess politicians have created.
