Open

Coming up

Don't miss

Replay


LATEST SHOWS

DEBATE

Nigeria's Battles

Read more

DEBATE

Nigeria's Battles (part 2)

Read more

AFRICA NEWS

Over 70 killed in Nigeria bus station terror attack

Read more

MEDIAWATCH

Pornagraphy without borders is key benefit of EU, says French MEP

Read more

FOCUS

China trade deal: is Taiwan's identity under threat?

Read more

ENCORE!

“Booty Looting” memory and mediums

Read more

WEB NEWS

Another Google Glass wearer attacked in San Francisco

Read more

LIFESTYLES

Sustainable cuisine

Read more

DEBATE

Eastern Ukraine: the escalation (part 2)

Read more

  • Rescue effort under way after ferry sinks off S. Korean coast

    Read more

  • Putin says Ukraine 'on brink of war' as Kiev evicts separatists

    Read more

  • Syria 'torture' photos silence UN Security Council members

    Read more

  • More than 100 schoolgirls kidnapped in northeast Nigeria

    Read more

  • 'Miracle girl' healthy after seven-organ transplant in Paris

    Read more

  • Paris police memo calling for Roma eviction ‘rectified’

    Read more

  • Burgundy digs into France's bureaucratic 'mille-feuille'

    Read more

  • French court drops ‘hate speech’ case against Bob Dylan

    Read more

  • Algeria rights crackdown slammed ahead of election

    Read more

  • Iraq closes notorious Abu Ghraib jail over security fears

    Read more

  • Berlusconi sentenced to community service for tax fraud

    Read more

  • In ‘Tom at the Farm’, Xavier Dolan blends Hitchcock and homoeroticism

    Read more

  • US to mark one year since Boston Marathon bombing

    Read more

  • Deadly fire rips through Chile’s Valparaiso for third day running

    Read more

  • India's Supreme Court establishes third gender category

    Read more

  • Bluefin-21 'mini-sub' to redeploy for Malaysian jet

    Read more

  • Paris hotel that hosted Holocaust survivors shuts for renovation

    Read more

  • Guardian, Washington Post win Pulitzers for NSA revelations

    Read more

  • French police begin mass DNA test in hunt for school rapist

    Read more

  • Americas to see 'Blood Moon' total lunar eclipse

    Read more

  • France looks to lift ailing economy with business-friendly diplomacy

    Read more

Business

Moody's downgrades 15 major banks

©

Text by News Wires

Latest update : 2012-06-22

Credit ratings agency Moody's downgraded 15 of the world's biggest banks on Thursday reflecting growing concern over the turmoil of financial markets. Barclays, HSBS and Deutsche Bank were amongst those who had their ratings cut.

AP - Moody’s Investors Service has lowered the credit ratings on some of the world’s biggest banks, including Bank of America, JPMorgan Chase and Goldman Sachs, reflecting concern over their exposure to the violent swings in global financial markets.

The downgrades late Thursday ultimately are a measure of Moody’s view on the ability of the banks to repay their debts. The ratings agency also cut its ratings on Barclays, Deutsche Bank and HSBC, some of the largest banks in Europe, a region fighting to contain a government debt crisis.

The banks “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 a statement outlining the rational for the downgrades.

The behemoth banks are all major players in the global stock and bond markets, which have become extremely volatile. However, Bauer noted that some of the banks, including JPMorgan Chase and HSBC, have reliable buffers in more stable businesses that could act as “shock absorbers” during a crisis.

Moody’s had said in February that it was considering downgrading the ratings of major banks in the U.S. and in Europe.

A downgrade usually means banks will have to pay more for its debt. Investors demand higher interest for riskier debt, which is what the downgrades represent.

However, with interest rates already at rock-bottom levels, the lower ratings may not significantly affect the cost of funding for the banks.

The stock market has also priced in any negative impact from the ratings downgrades, according to Bert Ely, a banking consultant in the Washington, D.C. area. “They’ve been telegraphing this thing for months,” he said.

In a sign that investors were taking the news in stride, stocks of major U.S. banks rose in afterhours trading. Moody’s made its announcement after regular stock trading had closed.

Morgan Stanley rose the most, 3.2 percent, gaining 45 cents to $14.41. JPMorgan Chase & Co. rose 38 cents to $35.89 and Bank of America Corp. rose 6 cents to $7.88.

Citigroup Inc. said it “strongly disagrees” with Moody’s assessment. Citi said it doesn’t believe the downgrade will impact its funding costs because the ratings actions have already been expected by the market and its business partners have included them in their analyses.

Morgan Stanley also disagreed with Moody’s, saying it did not think the ratings agency had fully considered the actions the bank has taken to shore up its finances.

The downgrades come at a time of great uncertainty in the global economy. Europe’s currency union is under threat, the U.S. economy is slowing and the red-hot economies of India, Brazil and China are cooling.

On Thursday the Dow Jones industrial average plunged 251 points, its second-worst loss of the year, as new reports indicating slower manufacturing in the U.S. and China made investors fearful that the global economy could be heading for another slump.

Moody’s has been on a downgrading spree lately. In June, it downgraded Spain by three notches, after downgrading 16 Spanish lenders in May. It also cut the ratings on seven German and three Austrian lenders in this month.

In its latest report, Moody’s didn’t treat all large banks alike. It sorted the banks it was downgrading into three categories, with JPMorgan, HSBC Holdings PLC, and Royal Bank of Canada in the top one.

Moody’s said those banks have stable businesses that can offset market losses. JPMorgan, for example, has a large base of consumer deposits and major lending, credit card and asset management businesses.

These banks have also managed to contain their exposure to risky European government debt, Moody’s said. While all three were downgraded, their debt had the highest ratings among the 15 banks affected.

The second group included Goldman Sachs Group Inc., Deutsche Bank AG and Credit Suisse Group AG. Moody’s said those banks rely heavily on their markets businesses to satisfy their shareholders, although some of them have managed their risk effectively.

In its last group were the weakest banks - Bank of America, Citigroup, Morgan Stanley, and Royal Bank of Scotland Group PLC. Moody’s said these banks have either had “problems in risk management or have a history of high volatility,” and some of them have implemented business strategy changes.

“These transformations are ongoing and their success has yet to be tested,” Moody’s said.

Date created : 2012-06-22

  • SPAIN - BANKING

    Spain's struggling banks may need EUR62 billion

    Read more

  • SPAIN

    Moody’s slashes Spain’s credit rating

    Read more

  • MARKETS

    Spanish, Italian bond yields rise amid eurozone concerns

    Read more

Comments

COMMENT(S)