Moody's Downgrades 15 Major Banks

Finance | June 22, 2012, Friday // 07:25|  views

All of the downgraded banks have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities, Moody's said. File photo

The credit ratings agency Moody's has downgraded 15 banks and financial institutions, some of the world's biggest, citing concerns about the stability of the global financial system.

UK banks downgraded include Royal Bank of Scotland, Barclays and HSBC. In the US, Bank of America, Citigroup, Goldman Sachs and JP Morgan are among those marked down.

The other institutions that have been downgraded are Credit Suisse, UBS, BNP Paribas, Credit Agricole, Societe Generale, Deutsche Bank, Royal Bank of Canada and Morgan Stanley.

The downgrades could raise costs for the banks, making it more expensive for them to borrow money.

"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 agency's statement.

Moody's said it recognized, "the clear intent of governments around the world to reduce support for creditors", but added that they had not yet put the frameworks in place that would allow them to let banks fail.

Some of the banks were put on negative outlook, which is a warning that they could be downgraded again later, on the basis that governments may eventually manage to withdraw their support.

Of the banks downgraded, four were cut by one notch on Moody's ranking scale, 10 by two notches and one, Credit Suisse, by three notches.

Moody's grouped the 15 institutions downgraded Thursday into three categories based on their relative credit-worthiness.

In the strongest group are JPMorgan, HSBC and the Royal Bank of Canada, which Moody's said had solid capital buffers and "contained" exposure to the European crisis. Moody's also said these banks demonstrated solid risk management during the financial crisis.

In the second group are Barclays, BNP Paribas, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs, Societe Generale and UBS. Moody's said these firms had varying risk factors, ranging from high dependence on capital markets operations to limited liquidity and exposure to Europe.

The weakest group includes Bank of America, Citigroup, Morgan Stanley, and Royal Bank of Scotland. Moody's said firms in this group had experienced problems with volatility and risk management, and in some cases had weaker buffers than their peers in the industry.

"The biggest surprise is the three-notch downgrade of Credit Suisse, which no one was looking for," said Mark Grant, managing director of Southwest Securities.

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Tags: Royal Bank of Scotland, Morgan Stanley, Citigroup, Bank of America, UBS, societe generale, Goldman Sachs, Deutsche Bank, Credit Suisse, Credit Agricole, BNP Paribas, Barclays, Royal Bank of Canada, HSBC, JPMorgan, Moody's, negative outlook


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