With the European bank issues, Moody’s Investors Service (MCO) has cut the debt ratings on five large U.S. banks, along with those of 10 other global financial institutions.
- Morgan Stanley (MS) received a two-notch cut
- Bank of America (BAC), which got a one-level cut
- Citigroup (C) received a two-notch cut
- Goldman Sachs (GS) received a two-notch cut
- JPMorgan Chase (JPM), received a two-notch drop.
Other non-U.S. banks that were downgraded include Barclays (BCS), BNP Paribas (BNP), Credit Agricole (ACA), Credit Suisse (CS), Deutsche Bank (DB), HSBC (HBC), Royal Bank of Canada (RY), Royal Bank of Scotland (RBS), Societe Generale (GLE), and UBS (UBS). With Credit Suisse receiving the biggest downgrade of 3 notches.
Moody’s cited the banks’ shrinking growth and dimming profit forecast in explaining the downgrade. The ratings agency also highlighted the firms’ exposure to the capital markets at a time of significant market volatility. “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,” said Moody’s global banking managing director Greg Bauer in a statement.
It’s possible now that this could increase borrowing costs as more trading partners could require more skin in the game.