Moody’s eyes downgrade of biggest US banks
NEW YORK CITY – Ratings agency Moody’s said Thursday it was mulling a downgrade for four major US banks due to an expected reduction in government support under financial reforms.
JPMorgan Chase, the largest US bank by assets; Wells Fargo and investment banks Goldman Sachs and Morgan Stanley were placed under review for a lower credit rating.
Two other banks – Bank of America, the second-largest US bank, and Citigroup— also were under review but the direction of their rating was uncertain, Moody’s said in a statement.
Moody’s said that the six largest US banks were under review as it “considers reducing its government (or systemic) support assumptions to reflect the impact of US bank resolution policies.”
Moody’s said it was evaluating the impact of the government’s financial reforms spurred by the 2008 financial crisis.
The largest banks have been forced to come up with plans for their dismantlement in the case that they become insolvent and fail.
The goal is that they can be wound up without the government being forced to step in and prop them and counterparts up as happened in the financial crisis.
“As US bank resolution policies continue to evolve, Moody’s will assess the opposing forces that may have an impact on bondholders at the holding company level should a bank become financially distressed,” the company said.
“The first is a lower level of systemic support that could result in a higher probability of default.
“The second is the potential for a more orderly workout and a required minimum level of holding company debt that may well limit losses in the event of a default.”
Moody’s announced in March that it would reassess its support assumptions for banks in the US and that it would consider whether to revise those assumptions by the end of the year.
Get Inquirer updates while on the go, add us on these apps:
Disclaimer: The comments uploaded on this site do not necessarily represent or reflect the views of management and owner of INQUIRER.net. We reserve the right to exclude comments that we deem to be inconsistent with our editorial standards.
To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.
Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:
c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City,Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94