Moody's Weights Ratings Cuts for Major Banks - NYTimes.com

Looks like The Day of Reckoning is finally coming to the financial sector..

February 16, 2012, 6:21 am

Moody’s Weights Ratings Cuts for Major Banks

By JULIA WERDIGIER

LONDON — Moody’s Investors Service has put Goldman Sachs, Morgan Stanley, Deutsche Bank, UBS and more than 100 other financial institutions on notice.

Citing increasingly challenging market conditions, the credit rating agency said it would review its grades for 114 banks based across Europe, as well as eight other financial institutions based elsewhere, including JPMorgan Chase, Bank of America and Nomura.

Moody’s indicated it could cut some credit ratings by as much as three levels as it weighed the risks to the banks’ investment banking models and large capital market exposures.

“The combination of changed operating conditions and increased regulatory requirements and restrictions has diminished these firms’ longer-term profitability and growth prospects,” Moody’s said in the statement, which was released on Wednesday after markets closed in New York.

In a separate statement from London, Moody’s said it was reviewing its ratings for banks based in European countries, including Italy, Spain and Britain. It cited the prolonged euro crisis, concerns about government debt and risks linked to large capital market businesses as reasons.

Banking stocks fell in Europe on Thursday. In London, Barclays shares fell 1.5 percent and HSBC was down 1.2 percent. In Paris, Société Générale, which also released earnings that missed forecasts on Thursday, and Crédit Agricole both fell more than 3 percent.

“The current environment is characterized by disrupted markets and a deteriorating, uncertain economic outlook,” Moody’s said. “In many countries, weakening sovereign creditworthiness is exacerbating these negative characteristics.”

Moody’s said it was reviewing most banks in Italy, Spain, France and Britain. They include Barclays, BNP Paribas and Crédit Agricole. It also cited “fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions” among the reasons for its action.

Moody's Weights Ratings Cuts for Major Banks - NYTimes.com

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