This seems like the tail wagging the dog, or something.

Oxford University colleges are more sound financially than the British government which funds them, so they have been downgraded by the ratings agencies.

Rupert Neate of the Guardian UK reports.

Oxford University colleges stripped of AAA credit rating

George Osborne‘s popularity at his alma mater may have taken a plunge yesterday when three Oxford colleges were stripped of the coveted AAA credit rating.

Ratings agency Fitch said it was forced to downgrade Lincoln, Somerville and St Peter’s because publicly-funded bodies are not meant to have a higher rating than the state that backs them, no matter how much cash they have in the bank.

The UK was downgraded from AAA by Fitch last week. Rival ratings agency Moody’s has already downgraded the UK to AA+ and Standard & Poor’s, the third major agency, has warned there is at least a one-in-three chance it will also follow suit.

Osborne, a graduate of Magdalen College, Oxford, had made retaining the AAA rating a key gauge of his credibility.

In the Tory manifesto before the 2010 general election he said: “We will safeguard Britain’s credit rating with a credible plan to eliminate the bulk of the structural deficit over a parliament.”

Fitch also downgraded the Bank of England, Transport for London and the London borough of Wandsworth.

Fitch said the Bank’s credit worthiness was “directly aligned” with that of the country as a whole. “The BoE is the monetary arm of the UK sovereign and as such its credit profile is aligned with that of the sovereign government,” the agency said. Its guidelines state: “Subnationals’ ratings are not higher than their sovereign, except in exceptional circumstances.”

The loss of the AAA rating might increase the colleges’ borrowing costs but the institutions have considerable cash piles. Lincoln College was sitting on total funds of £85.7m in July 2011, the most recent set of accounts available.