Home >> News >> Data >> More Downgrades as Moody’s Goes After Several Banks
Print This Post Print This Post

More Downgrades as Moody’s Goes After Several Banks

Count another major downgrade against the global financial community. On Thursday ""Moody's Investors Service"":http://www.moodys.com/ slashed credit ratings for 15 major financial institutions, including Bank of America, Citigroup, JPMorgan Chase, and Morgan Stanley, among others.


The reason for Moody's actions: The biggest banks face too much risk from debt-saddled Europe, earnings volatility, and still-faulty mortgages stateside.

""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,"" Greg Bauer, global managing director for Moody's, said in a statement.

He said the institutions ""also engage in other, often market leading business activities that are central to Moody's assessment of their credit profiles,"" adding that the ""activities can provide important ├â┬ó├óÔÇÜ┬¼├ï┼ôshock absorbers' that mitigate the potential volatility of capital markets operations.""

The ratings agency grouped the downgraded institutions into three groups.

The first, which includes Chase and several foreign banks, saw their credit assessments drop to a3 or better, with the same for deposit ratings. Senior debt ratings for their holding companies now hover at anywhere between Aa3 and A2.

Moody's acknowledged significant risks from capital markets operations for these firms but nodded at their ""stronger buffers,"" stable structural liquidity, and sound risk management.

The second group includes Goldman Sachs and several other foreign banks. A combination of ""sometimes adverse factors,"" including the debt crisis in Europe, led the ratings agency to slash credit assessments for these institutions to baa1 or baa2. Deposit ratings fell to a range between A1 and A2.

""Some firms are relatively weak with regard to structural liquidity or reliance on wholesale funding,"" Moody's said of the group.

Many other U.S.-based financial institutions fell into the third category. Bank of America, Citigroup, Morgan Stanley, and others saw their credit assessments fall to baa3. Deposit ratings sank to A3 and senior debt ratings fell to a range between Baa1 and Baa2.

""The capital markets franchises of many of these firms have been affected by problems in risk management or have a history of high volatility, while their shock absorbers are in some cases thinner or less reliable than those of higher-rated peers,"" Moody's said.

Stocks slid for many of the affected financial institutions by end of day Thursday, helping tilt the Dow Jones Industrial Average in a 251-point plunge, the second largest drop this year, according to the ""_Associated Press_"":http://www.detroitnews.com/article/20120621/BIZ/206210482/1361/Dow-loses-251--its-second-biggest-drop-this-year.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

Check Also

Mortgage Rates Climb to New 14-Year Highs

As the Federal Reserve issues another rate hike to tame high-riding inflation, Freddie Mac reported the fixed-rate mortgage climbed 27-basis points over last week, rising to levels last seen in 2008.