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15 major banks downgraded by Moody’s

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15 major banks downgraded by Moody’s

Credit ratings agency Moody’s has downgraded 15 global banks and financial institutions.

Moody’s based their decision on the bank’s exposure to volatility in the world’s financial markets and risk of outsized losses.

According to John Raymond the senior banking analyst at research firm Credit Sights, Moody’s decision would have little impact on the bank’s ability to borrow, as the banks had already expected so and had factored it in.

“So I don’t think Moody’s move will mean the banks end up having to increase the interest rates or charges that their customers face,” said Raymond.

The UK banks downgraded were Royal Bank of Scotland, Barclays and HSBC. Lloyds also had its rating cut by Moody’s in a separate announcement.

In the US, Bank of America and Citigroup were among those marked down.

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

Moody’s has divided the 15 banks into three group based on the banks’ resiliency to any global financial market turmoil.

HSBC is in the strongest “first group” along with Royal Bank of Canada and JP Morgan.

The “second group” lists the banks that are generally more stable businesses with sometimes adverse factors. The banks included in this group were Barclays, BNP Paribas and Goldman Sachs.

The “third group” comprises of the most volatile banks including Bank of America and Citigroup.

Lloyd’s was one of the institutions that said Moody’s decision would have limited impacts on their funding costs and market capacity.

However, Peter Hahn, a former executive at Citigroup and now a lecturer at Cass Business School in London, said the downgrades could limit the banks’ activities.

“Banks are going to have to put up collateral in their transactions with other banks,” he said.

“As they get downgraded, other banks and system players don’t want exposure.

RBS estimated that the downgrade could mean it would need to find an extra £9bn in collateral for its debts.

On the other hand, Citigroup of the US said it disagreed with Moody’s decision.



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