The simple answer is yes, of course they will. Ratings have ceased to have any impact on the market (as demonstrated by the downgrading activity last week). There are only a few important factors that need to be taken into account.

Is the issuer key to one of the world’s largest economies?

If it failed would that economy be decimated?

If the answer is yes to both of these questions, central banks have made it clear that they will pump money in and remove assets from these entities ensuring their survival. If this fails, a shot-gun marriage is always available (irrespective of the monopolies they may create), or perhaps neo-nationalism as the sale of bank equity increases to governments the world over...

So what about the UK banks? Well, it looks like RBS and HBOS/Lloyds are both still in a big mess. They are going to need more capital in the next three to six months and then they will be either 100% or close to 100% owned by the UK government. How about Barclays? Well it has managed to get through this year without reaching out to the government, but will it manage to hold on? Almost certainly if it can convince the Middle East investors that owning more of Barclays is a good thing because the bank will need more capital in the coming months. If Barclays does go to the UK government the senior bods there would be in a real mess. So it’s job preservation for them.

Should retail investors be concerned? Well pick your issuers well and make sure they all come up with a yes on the two questions above...