Moody’s downgrades world’s 15 biggest banks
Ratings cuts could increase funding costs and spur collateral calls.Updated: Jun 22, 2012 20:45 IST
Ratings agency Moody’s downgraded 15 of the world’s biggest banks on Thursday, lowering credit ratings by one to three notches to reflect the risk of losses they face from volatile capital markets activities, but banks criticised the move as backward looking.
Morgan Stanley, one of the most closely watched firms in the much anticipated review, had its long-term debt rating lowered by just two notches, one level less than had been expected, sending its stock up sharply in after-hours trading.
The downgrade left Morgan Stanley more highly rated than Bank of America Corp and Citigroup, but a step below Goldman Sachs Group.
Credit Suisse, which last week was warned about weak capital levels by Switzerland’s central bank, was the only bank in the group to suffer a three-notch downgrade. But its new A1 deposit and senior debt ratings still rank higher than many of its peers.
Other banks downgraded by two notches were: Barclays , BNP Paribas, Royal Bank of Canada, Citigroup, Goldman Sachs Group, JPMorgan Chase, Credit Agricole, and Deutsche Bank. Along with HSBC, ratings for Bank of America, Royal Bank of Scotland and Societe Generale were also cut by one notch. Nomura and Macquarie were included in an original list of global banks under review, but have already been downgraded.
“All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities,” Moody’s Global Banking managing director Greg Bauer said in the announcement.
Financial markets have been bracing for the downgrades since February, when Moody’s Investors Service said it had launched a review of 17 banks with global capital markets operations.
In a statement, Morgan Stanley said its ratings “still do not fully reflect the key strategic actions we have taken in recent years.”
Citigroup went beyond defending itself to blasting Moody’s for its treatment of US banks in general, and then to praising institutional investors and the US Congress for showing less respect for the agency.
“We have been especially surprised by Moody’s disproportionately adverse treatment of US firms relative to banks in Europe,” Citigroup said in a statement.
First Published: Jun 22, 2012 09:09 IST